Some Common Questions & Answers

How Long Does it Take to Sell My Business?

 

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It generally takes, on average, between five to eight months to sell most businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be.

It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business. This theory often "backfires," because buyers often will refuse to look at an overpriced business.

It has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment, generally 40 percent of the selling price or less, the shorter the time to a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business's ability to make the payments.

When you and the buyer are in agreement, both of you should work to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process. You don't want the buyer to think that you are hiding anything. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, final papers will be drawn and signed. Once the closing has been completed, money will be distributed and the new owner will take possession of the business.

What Can Business Supervisors Do - And, What Can't They Do?

Business supervisors are the professionals who will facilitate the successful sale of your business. It is important that you understand just what a professional business supervisor can do - as well as what they can't. They can help you decide how to price your business and how to structure the sale so it makes sense for everyone - you and the buyer. They can find the right buyer for your business, work with you and the buyer in negotiating, and every step of the way until the transaction is successfully closed. They can also help the buyer in all the details of the business buying process.

Most businesses are saleable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept, along with the terms of the seller financing, can greatly influence not only the ultimate selling price, but also the success of the sale itself.

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Selling Your Business Online

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Many business owners looking to sell their business don't realize they can use the internet to make the selling process go more smoothly. Online business for sale marketplaces allow sellers to reach a large number of potential buyers and provide resources for owners considering putting their business up for sale.

Q: What should a seller do to prepare for listing a business for sale online?

A: Allowing yourself enough time is key. Too often, people try to rush their business to market and run into complications during the selling process as a result. Figure out your company's financial situation so that you can present this information to prospective buyers.

Once you put the business up for sale, have all of the information relating to potential growth and revenue, past performance and business costs on hand. Putting the time and effort into preparing these figures in advance will tell potential buyers that you know what you're doing and give them more confidence in you.

Q: What tips do you have for creating a business for sale listing?

A: Providing the right information is imperative. There's a fine line between providing so few details that prospects don't take notice and providing so many that your business' confidentiality is compromised.

The key is providing the most information possible without giving away the identity of the business. It's important to give viewers an idea of the general location of the business, but don't post the street address, phone number or address in the listing. Instead, create a separate email address and phone number for inquiries from potential buyers.

It sometimes helps to tell potential buyers why you're selling the business. If you're honest, people tend to be less skeptical. Once you list your business, you might find that certain questions come up repeatedly in inquiries.

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Dealing with Your Prospects

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By following some simple communication guidelines when selling your business online, you can ensure you don't get caught up in a communication nightmare.

 
Step 1: Be Knowledgeable About Your Business

Know your business before you put it up for sale.
It sounds simple, but the fact remains that many business owners list their establishment for sale online without having a clear grasp on how much their business is worth and what facts to communicate to potential buyers.

The first step is to get all the financial information of your business in order, including cash flow and revenue numbers that span from the time you first owned the business to the current day. After you list your business for sale, you'll undoubtedly have to field legit financial questions from potential buyers, and you won't want to come off looking irresponsible or uninformed about your own business.

When you have made yourself an expert on this basic information, you can confidently put your business on the market and begin communicating with prospective buyers.

 
Step 2: Identify Serious Leads
 

Once you have listed your business for sale online, it's time to sit back and wait for the buyer leads to come in. Unfortunately, it is likely that some of these leads will not be from serious prospects, and it will be up to you to decide if an inquiry seems legit enough for you to devote a large amount of time and effort into following up.

Once a potential buyer has made initial contact, you can ask them some simple questions to quickly gauge how serious they are about going through with a transaction. These types of questions include how long they have planned on buying a business, how they plan on financing the business and how much money they have available for a down payment. If the contact provides vague or unconvincing answers, you'll probably not want to invest too much time and effort into keeping the conversation going.

Step 3: Keep Communication Flowing Through Purchase and Beyond

Now that you have found the perfect buyer, you'll have to continue effective communication through the purchase process and after.

After the business description and purchase price have been described, the purchase agreement typically deals with how the buyer intends to pay. Most buyers cobble together a variety of payment methods to complete the sale, each of which needs to be clearly discussed and identified.

Buyers should look for a clear schedule of payments with escrow agreements attached to any payments that are due prior to final closing. If the seller is financing part of the purchase price, the repayment schedule should also be described along with collateral requirements and interest details. This can become a sticking point if the seller expects to secure a first collateral position for assets that will be held as security by other lenders.

When a business is sold, the seller makes certain promises to the buyer in the form of warranties. These warranties are an extension of due diligence for hidden threats or liabilities that would devalue the business or its assets.

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Items to Consider When Deciding to Sell on Your Own

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In the world of real estate, selling without the assistance of a real estate agent has received a lot of attention. But is it really a good idea to try and sell your business on your own?

Is it possible to sell your business yourself? Absolutely, but it's not for everyone. But in most, the smart move is to hire a professional business supervisor to list your business and locate pool of potential buyers.

Business supervisor can add a lot of value, most importantly by maximizing the selling price of your business. Here are just a few of the things they bring to the table that you may have trouble doing on your own:

• Setting the Selling Price. Anyone can set an selling price for your business. But it takes experience to set an selling price that is neither too high nor too low for the marketplace. Although your business supervisor will work to get the highest possible price for your business, he also understands that the price needs to be at a level that allows buyers to meet income and cash flow requirements right out of the gate.
  
  
  Even more, a good business supervisor will be able to adjust selling price that may arise over the course of negotiations (e.g. cash sale vs. partially financed, finance terms, etc.).
  
  
• Laying the Groundwork for Negotiation. Their experience in business sales gives them invaluable insights into the minds of buyers and the workings of the marketplace itself. Most business supervisors are especially adept at developing a negotiation strategy that drives the sale toward its completion and enables the seller; to achieve your exit goals. But creativity and expertise aren't the only negotiation related benefits you can gain from a business supervisor. Many sellers also find that business supervisor give them a much needed objective perspective throughout the negotiation process.

• Marketing Your business. If you think marketing a business consists of placing an ad in the local classifieds, then it's definitely time to hire a business supervisor. Marketing a business is a highly involved and complex process; and business supervisor are experts at doing it right. A marketing strategy can include a variety of tasks including the preparation of a business plan, the compilation of promotional materials and the analysis of target markets. An additional wrinkle comes into play when the seller needs the sale to remain confidential for business or personal reasons. By limiting marketing efforts to a narrow band of qualified prospects, the business supervisor can maintain a low profile while ensuring that the right people know your business is on the market.

• Pre-Qualifying Buyers. As you might expect, there are a lot of tire kickers out there in the business for sale marketplace. I've seen too many sellers invest time and energy in a prospective buyer, and then find out later that he lacked the capacity and genuine desire to actually purchase the hotel.
  Business supervisor are extremely knowledgeable about which buyers are serious and which aren't, and just as importantly, which buyers possess the financial resources and skills to actually complete the transaction. Business supervisor possess the expertise and processes to quickly cull out the tire kickers and unqualifieds before they sap valuable time and energy from your sales process.

At the end of the day, it's your decision whether to hire a business supervisor or to attempt to sell your business on your own. Just make sure you know what you're getting into; be realistic about your skills and the time commitment it will require.

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How Well You Run Your Business

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Whether you're planning to sell your business in the near future or many years down the road, one of the most important rules to remember is the better care you have taken of the business, the more easily you'll be able to sell it.

This rule might seem like a no brainer, but it's very common for owners to focus so much on certain areas of the business that they neglect others, ultimately complicating the selling process when it comes time to leave the business. When someone is looking to purchase a business, they want to know that it has been properly run by its previous owner and will allow them the greatest chance for success.

There are a few key considerations business owners should keep top of mind at all times in order to help ensure the process will go as smoothly as possible when it's necessary to leave. Whether an owner plans to sell the business in one year or doesn't plan to sell it for a long time, addressing the following questions and actively making improvements where needed can pay off in spades when the time comes to put the business on the market.

Are Your Financials in Order?

 

Poor internal bookkeeping has been the downfall of many potential business sales. There is perhaps no bigger deal killer than when a potential buyer realizes that the owner has been disorganized keeping up the books and has no concrete way to prove the business's profitability. It's crucial to remember that if you can't accurately measure the financial strengths of your business, there's no way for a buyer to value it.

If you've neglected keeping proper track of financials, you can't start soon enough - even if you don't plan to sell your business for many years. It might seem like too big of a money or time investment to obtain the proper financial staff and systems to keep the books in order, but it's absolutely essential to your future and the future of your business.

Have You Laid Out Future Goals in a Business Plan?

Believe it or not, many businesses operate for years without a clear business plan, which makes it very difficult to sell when the time comes. Simply doing more of what you have been doing all along might have worked for you during your time as the business's owner, but that "strategy" will be of little help to a buyer who would take over the business with little knowledge of what you've done in the past. This is why it's important to develop a clear strategic plan that outlines the future goals of the business before you enter into the selling process.

This plan should include financial projections that prove to the buyer you are confident about the business's potential for growth and aren't attempting to hide anything. It's also important to communicate this plan throughout your business so that your employees can help transform these goals into reality and have a solid direction to follow after you're gone.

Have You Kept Your Business Up to Date?

In a business for sale transaction, physical appearance and condition can mean the world.
Oftentimes, owners are so busy and focused on other areas of their business that they neglect making important upgrades. They might not notice any detrimental effects from this while they're in charge, but once they try to sell the and realize that most buyers aren't eager to take over a business that is out of date, they'll regret not making these improvements along the way. For this reason, it's imperative to make any necessary upgrades or physical improvements to your business before putting it on the market.

Is Your Business Enabled to Run Without You?

It's important for a business owner to be actively in charge and to be invested in its success, but if you've run your business in a way that means it can't survive without you, problems are bound to arise when it's time to sell.

Buyers are typically wary of purchasing businesses in which the owners are indispensable and will have to maintain long term attachment. Owners who are committed to staying with the business can easily change their minds after the sale, leaving their buyers in a precarious situation.

To avoid this problem, make sure to hire and train qualified managers who are equipped to run the business even when you're not around. If necessary, seek the guidance of other business owners who have succeeded in making their businesses self sufficient and are willing to offer advice. This can be challenging, but you'll thank yourself for having done it when the time comes to sell.

Is Your Business Attractive to Business Supervisor?

Most business owners choose to work with a business supervisor when selling, as supervisors can often increase the chances of a successful sale as well as the net proceeds to the seller. To reap the benefits of these services, though, your business must be properly prepared.

The world of business supervisors is comparable to any other service profession in that there are a few select companies whose calls are always answered by potential business buyers because they can pick and choose among the best companies to sell. These business supervisors can be selective, so unless you have an attractive business without major "impairments" (which essentially means your business will be flagged as a risky investment), you might have a tough time attracting reputable assistance when you're ready to sell.

Selling your business might be a once in a lifetime experience for you, but supervisors do it for a living and are able to assess your business and determine whether or not they can find qualified buyers. The best business supervisors probably won't want to waste their time on businesses they know will be a headache to sell, so businesses that are in solid financial and operational shape will have the greatest success.

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How to Boost the Value of Your Business

There's no arguing that banks, potential investors and creditors look heavily to a company's financial statements to determine its value. However, past financials often aren't the whole story. Here are some additional factors to consider as you seek to maximize your company's value - whether you plan to sell soon or simply want to be ready when that day comes:

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Proven Potential for Increased Profitability

 

Perhaps the most important aspect of making a business attractive to a potential buyer is building their confidence that the business has the potential for increased profitability. Of course, step one is to produce documentation showing steady, reliable revenues and cash flow, but other steps can help paint a picture of untapped potential. For instance, highlighting (and proving) key advantages inherent in your businesses industry such as a history of the sector outperforming the economy at large or examples of recession resistance will demonstrate that your business carries less risk.

Regardless of your business' financial track record and your sector's inherent advantages (or disadvantages), a key way to build value into you business is to create a plan that will drive future growth. If you plan on continuing to operate the business, such a plan will help you think strategically and advance the business despite day to day operating demands.

If you plan to sell your business, experience has shown that owners who offer a clear, focused plan for growth have an easier time generating buyer interest and closing the sale. Your plan might detail strategies such as acquiring competitors, expanding to a complementary product or service, or implementing operational efficiencies. 

Be Organized

It sounds simple, but it's hard to do. Good organization will help you run your business more efficiently and reduce employee (and customer) confusion. When it comes time to sell, potential buyers will find the business and the operations easier to understand. At such a point it will be especially critical to have your books in order to provide credibility and to instantly make your business more attractive to potential buyers. No buyer wants to take over a disorganized business.

Focus on Physical Assets for Debt Financing

Buyers of businesses with tangible assets - capital equipment or owned real estate for example - are having greater success securing purchase loans. Though intangible assets, like intellectual property, knowledge and relationships, are all important parts of your business, they often don't come through in a financial statement.

Tangible assets, on the other hand, can be used as collateral to secure lending from banks. Focus on highlighting the tangible assets within your business, and supply potential buyers with a comprehensive list to give them a leg up when applying for loans.

Highlight the Positive

Finally, when the time comes to meet with potential buyers, concentrate on the strong points of your business. You know the business better than anyone else and there are bound to be some areas where your business excels, so make sure you highlight those. For example, perhaps your business is established within its trade sector and known throughout the community or maybe your customer base is widely diversified, providing security against any one customer having too much leverage. Highlighting what makes your business special will make you stand out to buyers and illustrate why your business is a good investment.

Whether you are ready to take steps to sell your business today or just wanting to build value for a future sale, following the tips above will help ensure success.

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Preparing to Sell Your Small Business During Challenging Times

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Business owners looking to sell their businesses often make some common errors when communicating with potential buyers, which can be a significant hindrance in successfully closing a deal. If you're ready to put your business on the market, knowing what buyers want and need will help you to make the most of your business sale and attract the best offers. In these trying economic times, this knowledge is essential. Many seller difficulties result from not being sufficiently aware of the following tricks of the trade:

Get Your Business in Shape

Potential buyers want to know that your business has good characteristics, such as location, a pleasing office space, high revenue stream, strong management, loyal client base, and a growing market base. If you can likewise convince your potential buyer that there are few risks incurred by buying your business, you're on the right track. That said, make sure your accounting books and financial statements are in order. If you're organized enough to present them with all the required information upfront, your potential buyer will feel more secure in knowing the business is well kept and offers great potential.

Make sure that you run your business in a steady manner well before considering a sale, without making any drastic changes that could result in revenue surprises. Nothing will make a buyer more hesitant than seeing an unexpected earnings reversal or irregular profitability that aligns with your for sale listing date.

Be Forthcoming

Knowledgeable buyers will conduct due diligence before making a business purchase, so don't hide any problems that your business has had, or currently faces. The buyer will eventually find out, I guarantee you. And when they uncover problems that you did not reveal upfront, they'll likely think you're hiding other things from them. And don't assume that you're in the clear if the sale has already been secured. If such problems are discovered after the purchase, you can be sued for fraud. So, be honest about the businesses risks and liabilities, as well as the real reason you're selling.

Establish a Business Transition Plan

Make sure the potential buyer can clearly visualize owning the business. If they think clients, day to day functions and even the business location prove unstable, they'll assume it's too much of a risk.

Make sure that transferable agreements commit clients to the business, and non compete agreements are recognized for key managers. It also doesn't hurt to present your business and marketing plan, were you to continue the business. While you should never promise the buyer a certain level of prospective sales or profit, presenting a plan can assure them you have the interests of the business in mind and are willing to offer your best prediction.

It is important, especially for those who own a retail business, that you have a lease that extends for a minimum of five years. If not, buyers will be hesitant to buy and financial institutions will think twice before giving out loans. A short lease signals that the business may prove unstable, so it is essential that you try to secure a transferable lease and lengthen the term, if possible.

Also, at the appropriate time, it's important to notify key management and employees that you will be selling the business. Being honest with them upfront will help to encourage them to stick around with a new owner. In turn, you can ensure the buyer that they will continue to have strong and experienced leadership on board right from the start.

Communicate With Buyers Early & Often

In an age where instant gratification is widespread - in everything from email to fast food - buyers expect immediate replies to their questions. In fact, 90% of initial sales inquiries are derived from online searches. If they can send a quick inquiry, they expect a quick response. Make sure you don't disappoint, as delaying will often kill deals, even if it's just a quick note to say: "I'll get back to you with that information next Tuesday."

Postponing your response often gives buyers the impression that you're stalling to come up with a satisfactory answer to hide a business inadequacy, even though that may not be the case. They want assurance that you can answer any of their questions honestly and succinctly.

Make sure to give buyers what they need to fully assess their purchase decision. If the potential buyer becomes frustrated with you, they'll likely think it's an early indication of how they'll become frustrated with the business itself. Individuals new to buying a business often do not know how/when to buy, what the business is worth, and have fear over making a mistake. Open communication and honesty will help put them at ease. Answer any questions, and build a relationship of trust.

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Four Traits of Businesses Sold Successfully

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There seems to be a light at the end of the tunnel for business sellers during this economic recovery period. Companies should prepare to sell with the presumption that the economy will continue to improve. With that in mind, there are four considerations to be aware of while preparing your company for the big sell. The more of them that apply to a business for sale scenario, the more luck the owner is bound to have in achieving a quick and successful transaction. 

Pattern of Profitability - Anyone looking to purchase a business wants to feel confident in the ability to continue making money. If business sellers don't make their companies' potential for profitability crystal clear, they'll likely have a hard time keeping potential buyers interested long enough to get a deal off the ground. For this reason, any seller with evidence of steady, reliable cash flow and revenues has an automatic leg up.

That could mean the difference between selling and not selling in today's volatile market. If buyers can see that a business has managed to maintain its profitability during these tough times, they'll know that there's stronger potential for when the market improves and that there is less risk in moving forward with a transaction.

Where are We Going? - Not only is it important for business sellers to show potential buyers that they've maintained profitability during difficult economic times, but also to provide evidence that the business has the potential to grow and thrive down the line. Sellers who can offer buyers a focused growth plan - which might detail strategies such as acquiring competitors or expanding to a complementary product or service - are having an easier time closing deals.

Seller Financing - There continues to be a lot of emphasis placed on a business seller's willingness to finance at least part of any business for sale deal, and for good reason. Transactions that require buyers to come up with the entire purchase price of a business simply don't close. Not only have buyers faced major drops in savings and retirement accounts as a result of stock market declines, they've also been hit with increasingly limited access to backed commercial loans. As a result, the sellers that are willing to finance part of the sale price and allow buyers to pay them back with interest later are having the greatest level of success.

Physical Assets for Debt Financing - It's no secret that banks are more cautious than ever before about lending. As a result, businesses with greater amounts of tangible assets - such as cash, durable equipment or owned real estate - are having much more success securing purchase loans.

While we expect the small business market to slowly improve, for now business owners considering going to market should think carefully about whether their businesses are fit to sell during these uncertain times. If they're not, owners would be wise to take steps to make their companies more marketable before going ahead with a plan to sell. If the business can appeal to buyers with these attributes, though, sellers can have great success overcoming current economic roadblocks.

Run Your Business Like You Have to Sell It

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While this article was written mostly for business owners, you will learn some of the pitfalls and warning signs to look out for with businesses you may consider purchasing. As well, it will provide you with some benchmarks to evaluate how to implement these suggestions once you own the business.

By positioning your business to operate in a certain manner starting today, you'll not only sell it for more, you'll actually make more money between now and then.

The key to selling anything is to make it easy for someone to buy. This is especially true when it comes to a business. There are certain things that have an enormous impact upon the eventual price you will obtain.

A Problem Later is a Problem Now

If there's something in your business that would turn off a potential buyer, chances are it's also hurting your business today. Typical examples are high customer concentration, the possibility of losing a key supplier or employee, contingent liabilities, past claims, leases due to expire, inaccurate inventory, poor monitoring systems, etc.

While trying to build your business, even if you have no plans to sell it, look at it through the eyes of a possible buyer. By simply identifying possible issues, and fixing them, your business will improve immediately. Likewise, these matters will not come back to haunt you. Don't think they'll disappear or that a savvy buyer won't uncover them. They'll stick around and hurt you today and down the road.

Keep Good Books and Records

A business with super clean books gets the most action, and usually the purchase price is very close to the selling price. When the time comes to sell, a business with clean books and records will generally sell in the shortest time frame possible. In fact, this is usually the number one reason why deals fall apart (outside of major, sudden surprises).

In operating your business today, keeping great books will allow you to always have a true grasp on your cash flow and the ability to properly analyze expense and other activity.

Systems, Policies and Procedures

I once read that a company's manuals, policies and procedures should be explained in such a way that the lowest level employee can understand them. If you incorporate a methodology to deal with every possible scenario that comes up, and modify it continuously, think about the positive impact that can have when the time comes to train a new employee, expand the office, or open a new location. Instead of wasting endless hours getting people up to speed, all you need to do is "throw the book at them."

Similarly, every buyer is concerned that too much of the business may be new to them or that they won't ever be able to grasp the guts of the business. With top notch manuals, systems and procedures, this concern will be completely eliminated so they can focus on replacing you effectively.

Unless an individual comes from a like industry, or is one of your current employees or partners, they will be worried about the transfer of your knowledge. Regardless of how simple your business model may be, training a new owner to do what you do every day is crucial. The majority of people buy businesses that are in new industries. As they go deeper into evaluating your business, they usually get nervous by thinking about all of the things they don't know. If you don't have a simple mechanism to show the new owner how to get up to speed quickly, or if they fail because your job role was too overwhelming for them, you too can suffer if you've participated in the financing.

If you approach the daily running of your business like you have to sell it tomorrow, you'll find yourself implementing strategies that will immediately improve your business, and will pay you multiple dividends down the road when the day arrives to sell it.

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