Jerry Verbout and Rose Stabler, of Certified Business Brokers in Houston, on Air with Host Steve Drake on KSEV 700 AM Radio

Houston, TX, January 01, 2010 --(PR.com)-- Jerry Verbout and Rose Stabler with Certified Business Brokers (CBB) were guests on KSEV 700 AM radio last week. The Host, Steve Drake, broadcasts a business talk show four days a week and is an investment advisor with RBC Wealth Management in Houston.

While there was a wide range of issues discussed during the hour-long show relating to buying or selling a business, one theme that ran through the questions from call-in listeners was, "how much could I sell my business for." One call-in business owner wanted to know, "How much can I sell my contract manufacturing shop for if my gross sales are about $2.5 million? I heard that my competitor down the street sold his for gross sales plus inventory."

Verbout, business broker and M&A advisor with CBB, replied to the caller, "Well, the answer to that question would take longer than the air time we have for the show. In essence, a business is valued based on its bottom line earnings, not the top line revenues. The business down the street might have the same gross sales, may be in the same business, but may have a very different profit margin based on how the business is operated. This would mean their bottom lines will not be the same, nor will their values."

Stabler, managing partner at CBB, added, "You also need to be aware of what bottom line is being used to determine the value. Most valuation methods we use are based on a multiple of the bottom line earnings. So, if you are told your business would sell for 3X your bottom line, you should ask which level of earnings is being used. We use Seller's Discretionary Earnings, but other levels that can be used are EBITDA or EBIT, to name a couple."

Value drivers were also discussed, which play a big role in the price a buyer will pay for a business acquisition. Host Drake wanted to know exactly what were some of those value drivers.

"There are many aspects of a business that add value in the eyes of prospective buyers. One would be the quality of the workforce and the depth of management in place. Another would be the diversity of the customer base and suppliers. Having a work backlog or recurring revenues from contractual-based clients also adds value. Essentially, these drivers, or attributes, reduce the risks of a business for a new owner. The lower the risk, the more a buyer would pay to acquire it," explained Stabler.

"For instance," added Jerry, "if one business has quality capital assets and the newest gadgets for speedy production, versus a business that has old, outdated machinery, a buyer would see that a significant amount of additional investment would be needed to upgrade the shop to compete with the other business. Therefore, the values of the two business would not be worth the same in eyes of the marketplace of buyers."

Everyone reads or hears about big corporate mergers and large company acquisitions. However, big corporations aren't the only companies being bought and sold. Profitable, privately-held small businesses are changing hands everyday. These transactions are done behind the scenes and are not reported along with the daily stock market news. These business exchanges fly under the radar of the public at large -- which may be part of the reason that it is not commonly understood how it all works and what prices are being paid.

Business owners and those looking to acquire a business were directed to CBB's website at www.certifiedbb.com for more information.

About Certified Business Brokers (CBB):
CBB, headquartered in Houston, is Texas' largest business brokerage firm and is a founding member of the International Business Brokers Association (IBBA) and the Texas Association of Business Brokers (TABB). They are also members of Association for Corporate Growth (ACG) and M&A Source. They are specialists in Business Brokerage, Mergers and Acquisitions, Exit Planning, and Business Valuations and Appraisals.

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