4 Things Business Supervisor Know That Business Owner Don't

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Timing Is Everything

The timing of a business sale can be tricky. There really is no perfect way to predict how the broader market will change in the coming months and what effect that will have on your client's business. The first quarter of the year (January - March) is the busiest time for business transactions, as both buyers and sellers take advantage of the new year to pursue their goals. Thinking through the optimal timing to list, show, and close a business for sale transaction can help your client maximize his or her outcome.

Seller Financing is a Must

Obtaining financing for a business purchase from banks is still challenging for most, if not all buyers. As a result, most buyers still need help, as very few can pay all cash for a business purchase. Beyond increasing the likelihood of a sale and maximizing the sale price, by financing a part of the purchase your clients also have the benefit of locking in a fixed income stream. Go over this process with the seller and develop a financial plan to make sure the client understands the implications.

Callers Aren't Always Buyers

This is a very important issue as business sellers can often be overwhelmed by a high number of inquiring buyers. Be sure to warn your client that many of these callers may not be viable candidates and, in fact, could be competitors snooping for information on your client's business.

Often times, people will call because they are interested in buying a similar business soon, but may not have the financial resources to make a purchase now. By weeding these people out early, or by hiring a business supervisor to handle these details on your behalf, your client will have more time to concentrate on quality buyers.

A Done Deal isn't the End

In most small business sales, the signing of a contract isn't the end of an owner's obligations. Former owners often stay on for a negotiated period of time to help advise and guide the new owner. 

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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.

How to Make Your Business Marketable

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It's not uncommon that two business owners simultaneously looking to sell in the same area will undergo completely different experiences. One might find the selling process to go quickly and smoothly, with the business commanding a respectable price. At the same time, the other might struggle as the business sits on the market for many months, eventually selling for much less than they had hoped. What accounts for these two very different experiences? The first seller most likely had a much better understanding of how to make their business marketable to prospective buyers.

In many ways, selling a business isn't too different from selling a house. In both cases there are certain factors that can have a significant impact on whether or not the property is marketable to buyers, such as physical condition, the quality of a for sale listing and financial details. Ultimately, though, selling a business is a unique situation that presents unique challenges. If business owners enter into the selling process without sufficient knowledge and preparation, they could find that their businesses sell for less and stay on the market much longer than they'd like.

To make a business as marketable as possible, business sellers should pay close attention to the following considerations:

Create a Strong Listing

While the physical condition of a business is a critical element in its marketability, how a seller presents the establishment in a for sale listing can be just as important. Sellers who create strong, carefully thought out listings almost always have the most success selling their businesses. The top goal should be to provide as many details as possible without revealing the exact identity of the business (assuming you'd like to keep that confidential, as most sellers do). Sellers who take this approach are usually leaps and bounds ahead of the competition from the start, and are likely to pull in higher prices and sell their business in much less time.

The first step is to determine where you will list your business for sale. Traditional local newspaper listings can target a niche audience, but online listings typically offer much wider exposure. The marketing strategies and overall functionality of business for sale websites differ greatly from site to site, so it's crucial to do your homework before deciding where to list.

When it comes to the content of the listing, the key is to know which details to include and which to leave out. Buyers gravitate most toward detailed listings, but there's a fine line between being forthcoming with useful information and breaching confidentiality. It's important not to include information that could let competitors and employees know the business is on the market.

If possible, it's typically beneficial to include financial information such as revenue and cash flow, as this is the most common criteria potential buyers use to search for businesses. By including these numbers in a listing, a seller is likely to get many more views and find that buyers are much more willing to transition from casually interested to seriously interested. The willingness to offer this information signals to potential buyers that the existing owner is confident in the business and that the purchase would be a good investment.

In addition, business sellers can make their listings more appealing to prospective buyers by including geographic information such as state and county. Most buyers search at the city level, so including that information in your listing will likely result in a large number of views. However, it's generally not a good idea to reveal the exact identity or location of the business to avoid confidentiality issues.

Other elements of great listings include creative headlines that emphasize the top selling points of a business, attractive photos of areas in the establishment that don't reveal its specific identity, clear contact information (it's best to set up a nondescript phone number and e-mail address specifically for buyer inquiries), and careful attention to spelling and grammar.

Get the Books in Order

Business sellers who fail to accurately account for all business revenue before going to market can face major problems once they begin dealing with potential buyers. Still, in an effort to save on taxes many business owners don't report all their income and then tell prospects they have a greater amount of annual revenue than what's in the books. Not only does this make buyers question the seller's integrity, it puts them in the difficult position of having to decide whether or not to believe the supposed revenue number is accurate.

To help make their businesses more marketable, owners thinking of selling should begin keeping complete, detailed financial books at least three years prior to a sale so that all income is accounted for and can be properly evaluated by the buyer. This includes removing all unnecessary expenses from the books, such as a "company car" that isn't actually used for business purposes. A higher tax bill might follow, but it will also result in a higher sale price once a transaction takes place.

Renovate and Upgrade Well in Advance

A great for sale listing will get solid buyers interested, but a well kept, well run and physically appealing business will seal the deal. Once a prospective business buyer has communicated extensively with a seller and wants to go forward toward a transaction, he or she will want to view the business in person. This isn't the time for the seller to scramble and make sure the business is presentable. Instead, sellers should work to get their businesses looking and running as great as possible well before listing the business for sale.

It can be tempting to put off essential renovations until the last minute. Business for sale transactions typically take time, so there might not seem to be any rush. The truth is, though, that it's impossible to predict exactly when a sale might happen or exactly how major a renovation can prove to be. As such, not only should a seller complete renovations to make their business marketable, they should also complete them well in advance to avoid complications down the line.

Don't Underestimate Curb Appeal

Business sellers often go to great lengths to perform necessary upgrades to the insides of their establishments, but completely neglect how the business looks on the outside. Sellers should remember that the outside of the business is the first part of the business a potential buyer will see, and first impressions can mean everything.

For this reason, it's important to make sure the business exterior looks as good as the inside. Does the property look clean and welcoming, or is it poorly landscaped and in need of renovation? As with inside upgrades, outside renovations should never be put off to the last minute, but preferably taken care of prior to putting the business on the market. Once a potential buyer is scheduled to view the property in person, sellers should then do another inspection and complete any necessary last minute fixes.

Offer Seller Financing

Recent economic hardships have left many potential business buyers without the financial means to purchase a business. Thus, a business seller's willingness to finance at least part of a sale has become a major factor in marketability. With most independent buyers unable to access necessary funds from lending institutions or afford a down payment on their own, seller financing has become an essential ingredient in closing business for sale deals.

When sellers offer financing in a transaction, they allow buyers to pay some of the purchase price of the business in the form of a promissory note. It means the buyer agrees to pay back the remainder of the sale price, with interest, at a later date. This scenario does obligate the seller to have a continued stake in the business, but if a buyer is a good investment risk, a seller could reap great benefits by "being the bank." Seller financed businesses typically sell for 15 percent more than businesses in all cash sales, and interest accrued down the line could add greatly to the principal value of a business.

To attract more prospective buyers, business sellers willing to provide financing should be sure to advertise it as they put their businesses on the market. Because seller financing has become so important in marketing and selling a business today, we launched a feature on 2misi.com that allows sellers to clearly advertise their willingness to offer it. Buyers then have the ability to search only for businesses that are at least partly seller financed. The feature has led to increased listing views for sellers offering financing, significantly boosting the marketability of their businesses.

Step into a Buyer's Shoes

When selling any type of business, it can be easy to forget what it's like to be in a buyer's position. There's so much responsibility involved in putting a business on the market that many sellers lose track of the "big picture" as well as their grasp on what makes a business appealing in the business for sale market in the first place. They might feel so pressured to sell quickly and for a certain price that they neglect steps that can be essential for a smooth sale.

To make sure their businesses are as marketable as possible, sellers need to take a step back and remember what they looked for when they went through the process of buying their business. Were there specific details they looked for in business for sale listings? How much of an impact did their first look at the outside of a business have in their decision to pursue or abandon a purchase? The potential buyers will be going through the exact same process, so those who have taken the time to properly prepare, and have the ability to think like a buyer, will be the ones most likely to experience smooth, successful sales.

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