Rating Buyer Seriousness

Use the following criteria to separate the serious buyers from window-shoppers.
(Add up plus points, subtract minus points. The serious buyer will rate a 6 or above.)

Minus Point Factors

• -4 needs outside financing (excluding home equity)
• -4 been looking for 6 months or more
• -3 no available cash
• -3 still working in corporate world
• -2 spouse not supportive of buying a business
• -2 uses a legal pad or clipboard and takes too many notes
• -2 feels leisurely about finding the "just-right" business
• -1 now renting (although has lived in area for some time)
• -1 under 25 or over 62

Plus Point Factors

• +3 does not have a job or has just resigned
• +3 understands that books and records are not only indicators of value
• +2 has enough money to buy a business
• +2 no dependents
• +2 family member or close relative has been a business owner
• +2 willing to take the time to look without a lot of notice
• +1 location is not a prime consideration
• +1 age 21 to 62
• +1 skilled worker or professional

Copyright BBP 2003

Rating Today's Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them are becoming more divergent and complex. The following are some of today's most active categories of business buyers:

Family Members

Members of the seller's own family is a traditional category of business buyer: tried but not always "true." The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the "heir to the throne." If this has been done, the family member may be the best type of buyer.

Too often, however, the difficulty with the family buyer category lies in the conflicts that may develop. For example, does the family member have sufficient cash to purchase the business? Can the selling family member really leave the business? In too many cases, these and other conflicts result in serious disruption to the business or to the sales transaction. The result, too often, is an "I-told-you-so" situation, where there are too many opinions, but no one is really ever the wiser. An outside buyer eliminates these often insoluble problems.

The key to deciding on a family member as a buyer is threefold: ability, family agreement, and financial worthiness.

Business Competitors

This is a category often overlooked as a source of prospective purchasers. The obvious concern is that competitors will take advantage of the knowledge that the business is for sale by attempting to lure away customers or clients. However, if the business is compatible, a competitor may be willing to "pay the price" to acquire a ready-made means to expand. A business brokerage professional can be of tremendous assistance in dealing with the competitor. They will use confidentiality agreements and will reveal the name of the business only after contacting the seller and qualifying the competitor.

The Foreign Buyer

Many foreigners arrive in the United States with ample funds and a great desire to share in the American Dream. Many also have difficulty obtaining jobs in their previous professions, because of language barriers, licensing, and specific experience. As owners of their own businesses, at least some of these problems can be short-circuited.

These buyers work hard and long and usually are very successful small business owners. However, their business acumen does not necessarily coincide with that of the seller (as would be the case with any inexperienced owner). Again, a business broker professional knows best how to approach these potential problems.

Important to note is that many small business owners think that foreign companies and independent buyers are willing to pay top dollar for the business. In fact, foreign companies are usually interested only in businesses or companies with sales in the millions.

Synergistic Buyers

These are buyers who feel that a particular business would compliment theirs and that combining the two would result in lower costs, new customers, and other advantages. Synergistic buyers are more likely to pay more than other types of buyers, because they can see the results of the purchase. Again, as with the foreign buyer, synergistic buyers seldom look at the small business, but they may find many mid-sized companies that meet their requirements.

Financial Buyers

This category of buyer comes with perhaps the longest list of criteria--and demands. These buyers want maximum leverage, but they also are the right category for the seller who wants to continue to manage his company after it is sold. Most financial buyers offer a lower purchase price than other types, but they do often make provision for what is important to the seller other than the money--such as selection of key employees, location, and other issues.

For a business to be of interest to a financial buyer, the profits must be sufficient not only to support existing management, but also to provide a return to the owner.

Individual Buyer

When it comes time to sell, most owners of the small to mid-sized business gravitate toward this buyer. Many of these buyers are mature (aged 40 to 60) and have been well-seasoned in the corporate marketplace. Owning a business is a dream, and one many of them can well afford. The key to approaching this kind of buyer is to find out what it is they are really looking for.

The buyer who needs to replace a job is can be an excellent prospect. Although owning a business is more than a job, and the risks involved can frighten this kind of buyer, they do have the "hunger"--and the need. A further advantage is that this category of buyer comes with fewer "strings" and complications than many of the other types.

A Final Note

Sorting out the "right" buyer is best left to the professionals who have the experience necessary to decide who are the best prospects.

Copyright BBP 2003

Red Flags in the Sunset

Unlike that poetic title of an old-time standard song, (Red Sails in the Sunset), red flags are not a pretty sight. They can cause a deal to crater. Sellers have to learn to recognize situations indicating there might be a problem in their attempt to sell their business. Very, very seldom does a white knight in shining armor riding a white horse gallop up, write a large check and take over the business - no questions asked. And, if he did, it probably should raise the red flag - because that only happens in fairy tales. Now, if the check clears - then fairy tales can come true.

Sellers need to step back and examine every element of the transaction to make sure something isn't happening that might sink the deal. For example, if a company appears interested in your business, and you can't get through to the CEO, President, or, even the CFO, there most likely is a problem. Perhaps the interest level is not what you have been led to believe. A seller does not want to waste time on buyers that really aren't buyers. In the example cited, the red flag should certainly be raised.

A red flag should be raised if an individual buyer shows a great deal of interest in the company, but has no experience in acquisitions and has no prior experience in the same industry. Even if this buyer appears very interested, the chances are that as the deal progresses, he or she will be tentative, cautious and will probably have a problem overcoming any of the business's shortcomings. Retaining an intermediary generally eliminates this problem since every buyer is screened and only those that are really qualified are even introduced to the business.

Both of the above examples are early-stage red flags. Sellers have to be focused so they don't waste their time on buyers that are undesirable. If a buyer appears to be weak, does not have a good reason to need the deal, or otherwise unqualified - the red flag should be raised because the chances of a successful transaction are diminished. The seller might seriously consider moving on to other prospects.

Red flags do not necessarily mean the end of the deal or that it should be aborted immediately. It simply means that the seller should pay close attention to what is happening. Sellers should keep their antenna up during the entire transaction. Problems can develop right up to closing. Here is an example of a middle-stage red flag: The seller has received a term sheet from a prospective buyer and is then denied access to the buyer's financial statements in order to verify their ability to make the acquisition. As a reminder, a term sheet is a written range of value for the purchase price plus an indication of how the transaction would be structured. It is normally prepared by the would-be purchaser and presented to the seller and is non-binding. A buyer who is not willing to divulge financial information about his or her company, or, himself, in the case of an individual, may have something to hide. Due diligence on the buyer is equally as important as due diligence on the business.

If a proposed deal has entered the final stages, it doesn't mean that there won't be any red flags, or additional ones, if there have been some along the way. If there have been several red flags, perhaps the transaction shouldn't have gone on any further. It is these latter stages where the red flags become more serious. However, at this point, it makes sense to try to work through them since problems or issues early-on apparently have been resolved.

One red flag at this juncture might be an apparent loss of momentum. This might mean a problem at the buyer's end. Don't let it linger. As mentioned earlier, at this juncture all stops should be pulled out to try to overcome any problems. If a seller, or a buyer, for that matter, suspects a problem, there might very well be one. Ignoring it will not rectify the situation. When a red flag is recognized, it is best that it be confronted head-on. It is only by acting proactively that red flags in the deal can become red sails in the sunset - a harbinger of smooth sailing ahead.

Copyright BBP 2003

Seize the Moment: Tips for Sellers (Option A)

Those business owners who decide to take advantage of a favorable market should act quickly to launch the selling process. There are vital steps to take--and crucial realizations to face--in preparing for this all-important transaction.

1. Resolve current problems as soon and as thoroughly as possible. If the business is a partnership, both parties should be agreed about the major decisions to be made in the selling process. Hopefully, in cases where the business is a partnership, a buy-sell agreement is firmly in place.
2. Financial records must be accurate, up-to-date, and impressive indicators of the owner's business ability. Some buyers may be willing to buy potential, but they don't want to pay for it. In fact, sellers should be open about all aspects of the business that might affect the sale; otherwise, once the real facts are revealed (as they inevitably will be!), the sale may be lost.
3. Sellers must understand from the beginning that they may have to help finance the sale. The seller's business broker, in qualifying potential buyers, will also assess their financial credibility and their ability to run a successful business, thus helping to take the understandable fear out of seller financing.
4. Sellers should also seek the advice of a business professional in determining price. The business broker will apply industry-tested valuation methods, and will incorporate those intangibles to be ensure that the business will not be underpriced. At the same time, the business broker will point out to sellers how the price is dictated by the marketplace and that realistic pricing is an absolute must. Most buyers, faced with an out-of-sight price won't wait for it to drop--they'll just go elsewhere.
5. In marketing the business for sale, sellers benefit many times over from the guidance of a business broker professional. The business broker who lists the particular business for sale represents the seller and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to the seller. The broker will also present and assess offers, and, at the appropriate juncture, he or she can also help in structuring the sale transaction itself. The broker and the seller become a team, involved in a relationship of mutual trust, with the common goal being the successful business sale.

Copyright BBP 2003

Seize the Moment: Tips for Sellers (Option B)

If you have made the decision to sell your business, the wisest first move is to contact a qualified business broker professional, who can . . .

• Advise you on pricing and structuring the sale of your business.
• Prepare the marketing strategy, using professional resources.
• Determine the right buyer for your particular business.
• Educate buyers in the business-buying process.
• Keep you informed about market reaction.
• Present offers and point out strengths and weaknesses.

When it comes time to sell, one of the best decisions a business owner can make is to continue managing his or her business efficiently (and profitably), while depending on the services of a business broker to forge the steps of the sale. The business broker professional is an invaluable advisor during the entire process, offering both objectivity and negotiation skills honed through years of experience in the buying and selling of businesses.

Copyright BBP 2003

Seller Financing

Another important factor relating to the asking price is the amount of cash involved in the sale. There is an old saying that the higher the full-price, the lower the down payment - and vice-versa. The sale of almost any business involves some seller financing. The smaller the down payment, the higher likelihood of a quick sale. No seller wants to take back his or her business because the buyer wasn't successful. On the other hand, a buyer wants to make sure that the business will not only pay for itself, but also provide sufficient income for his or her family's needs.

What it all boils down to is that the seller wants the buyer to be successful and the buyer wants to buy a successful business. With the amount of capital required in today's market to buy a business, sellers should feel optimistic that they are dealing with successful buyers.

A Valuable Service

Screening and qualifying buyer prospects is perhaps the business broker's most valuable service. Business brokerage industry statistics indicate that over 90 percent of buyer prospects who call on business-for-sale ads are unqualified for some reason. The successful business broker survives by mastering qualifying and screening techniques!

Maintaining Confidentiality

Confidentiality is always a major concern. Sellers feel that maintaining confidentiality is important in safeguarding the current business. They don't want the word to leak out to customers, suppliers, competitors - and especially the employees. This is an area where a business broker professional can especially help. They use non-specific descriptions, screen and qualify buyers and require buyers to sign confidentiality agreements before showing businesses or providing specific information.

However, even under the best of circumstances, rumors can fly. There are basically two ways sellers can muffle the business-for-sale problem. The first is to explain that over the years there have been people who have inquired about whether the business might be for sale. These inquiries are unavoidable and they do happen.

The other way is to handle the matter directly and to explain that you have been considering retiring and now may be the right time. The employees, especially the key ones, should be told prior to putting the business on the market so they don't hear the rumors second-hand. They should be told that they are very important to the business's success and that a new owner would most likely be happy to retain them. When the sale is complete, they can be offered a bonus for helping in the process. Sellers should do whatever it takes to keep the employees from deserting the ship and on deck to maintain business as usual. Once employees have been dealt with openly and fairly, they will understand that discretion will help protect their future.

The Future of the Business

Sellers may feel that they have built the platform for the future growth of the business. It is only natural for them to want to share in any extraordinary profits in what they feel they have helped create. Sometimes, if the price is low enough and it allows a buyer to purchase the business, he or she may be willing to provide some type of earn-out or royalty based on any substantial increase in sales. The professional business broker can offer advice on how to make this work for everyone. However, everyone has to agree that no one can predict the future. As mentioned earlier, the buyer is hoping to buy the future, but is not willing to pay
for it.

What buyers think

Many buyers think that the business they buy should be able to pay for itself. They are wary of sellers who demand all cash. Is the seller really saying that the business can't support any debt, or is he or she saying that the business isn't any good and I want my cash out of it now, just in case?

Copyright BBP 2003

Seller Financing: It Makes Dollars and Sense

When contemplating the sale of a business, an important option to consider is seller financing. Many potential buyers don't have the necessary capital or lender resources to pay cash. Even if they do, they are often reluctant to put such a hefty sum of cash into what, for them, is a new and untried venture.

Why the hesitation? The typical buyer feels that, if the business is really all that it's "advertised" to be, it should pay for itself. Buyers often interpret the seller's insistence on all cash as a lack of confidence--in the business, in the buyer's chances to succeed, or both.

The buyer's interpretation has some basis in fact. The primary reason sellers shy away from offering terms is their fear that the buyer will be unsuccessful. If the buyer should cease payments--for any reason--the seller would be forced either to take back the business or forfeit the balance of the note.

The seller who operates under the influence of this fear should take a hard look at the upside of seller financing. Statistics show that sellers receive a significantly higher purchase price if they decide to accept terms. On average, a seller who sells for all cash receives approximately 70 percent of the asking price. This adds up to approximately 16 percent difference on a business listed for $150,000, meaning that the seller who is willing to accept terms will receive approximately $24,000 more than the seller who is asking for all cash.

Even with these compelling reasons to accept terms, sellers may still be reluctant. Selling a business can be perceived as a once-in-a-lifetime opportunity to hit the cash jackpot. Therefore, it is important to note that seller financing has advantages that, in many instances, far outweigh the immediate satisfaction of cash-in-hand.

• Seller financing greatly increases the chances that the business will sell.
• The seller offering terms will command a much higher price.
• The interest on a seller-financed deal will add significantly to the actual selling price. (For example, a seller carry-back note at eight percent carried over nine years will double the amount carried. Over a nine-year period, $100,000 at eight percent will result in the seller receiving $200,000.)
• With interest rates currently the lowest in years, sellers can get a much higher rate from a buyer than they can get from any financial institution.
• The tax consequences of accepting terms can be much more advantageous than those of an all-cash sale.
• Financing the sale helps assure the success of both the sale and the business, since the buyer will perceive the offer of terms as a vote of confidence.

Obviously, there are no guarantees that the buyer will be sucessful in operating the business. However, it is well to note that, in most transactions, buyers are putting a substantial amount of personal cash on the line--in many cases, their entire capital. Although this investment doesn't insure success, it does mean that the buyer will work hard to support such a commitment.

There are many ways to structure the seller-financed sale that make sense for both buyer and seller. Creative financing is an area where your business broker professional can be of help. He or she can recommend a variety of payment plans that, in many cases, can mean the difference between a successful transaction and one that is not. Serious sellers owe it to themselves to consider financing the sale. By lending a helping hand to sellers, they will, in most cases, be helping themselves as well.

Copyright BBP 2003

Selling - A Seller's Major Concerns

For many owners, selling their business is a new experience, and there is always the fear of the unknown. Selling a business is a not only a major economic decision but also can be an emotional one. After all, many business owners have spent many years, and a lot of hard work building the business. When the decision to sell is made, there will inevitably be accompanying concerns. However, when faced head-on these concerns can usually be addressed and resolved. Here are some of the major concerns and ideas on how to deal with them.

Getting the Highest Possible Price

Every seller wants to get the highest possible price for their business - that's a given. Here is an old, but very accurate definition:

• The Asking Price is what the seller wants.
• The Selling Price is what the seller gets.
• The Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.

Today's buyers are more educated, more sophisticated, and more demanding than ever before. They seem to be searching for a "sure thing" - yet, many are afraid to make the leap-of-faith necessary to make the final plunge. Buyers are also more numbers conscious than in prior years. Somehow they think they can buy a business and continue with business as usual.

Sellers, on the other hand, must understand that the buyer may buy with an eye to the future, but is only willing to pay for the past performance of the business. The buyers believe that the future of a business is up to them and they should reap the benefits of their efforts. The value or price, however, in their minds, is based on what the seller has done with it.

In order to obtain the highest possible price, the seller should make sure that the financial records are crystal clear. Any issues, whether, financial, operational, legal, or environmental, should be addressed and resolved prior to putting the business on the market. Hidden issues have sabotaged more sales than anything else.

This may seem a contradiction, but the seller must go to market initially with a fair price. Too many times, a seller's first inclination is to start with a very high - and - unreasonable price. They may feel that the business is really worth what they are asking and may be unwilling to accept the fact that the price is unreasonable. The thinking is that an interested buyer can always make an offer. Interested buyers will feel that the price is so high that a fair offer would not even be considered. A professional business broker can advise buyers on what is reasonable and what is not.

Copyright BBP 2003

Selling - What Does an Intermediary Expect from You?

If you are seriously considering selling your company, you have no doubt considered using the services of an intermediary. You probably have wondered what you could expect from him or her. It works both ways. To do their job, which is selling your company, maximizing the selling price, terms and net proceeds, plus handling the details effectively, there are some things intermediaries will expect from you. By understanding these expectations, you will greatly improve the chances of a successful sale. Here are just a few:

• Next to continuing to run the business, working with your intermediary in helping to sell the company is a close second. It takes this kind of partnering to get the job done. You have to return all of his or her telephone calls promptly and be available to handle any other requests. You, other key executives, and primary advisors have to be readily available to your intermediary.
• Selling a company is a group effort that will involve you, key executives, your financial and legal advisors all working in a coordinated manner with the intermediary. Beginning with the gathering of information, through the transaction closing, you need input about all aspects of the sale. Only they can provide the necessary information.
• Keep in mind that the selling process can take anywhere from six months to a year -- or even a bit longer. An intermediary needs to know what is happening -- and changing -- within the company, the competition, customers, etc. The lines of communication must be kept open.
• The intermediary will need key management's cooperation in preparation for the future visits from prospective acquirers. They will need to know just what is required, and expected, from such visits.
• You will rightfully expect the intermediary to develop a list of possible acquirers. You can help in several ways. First, you could offer the names of possible candidates who might be interested in acquiring your business. Secondly, supplying the intermediary with industry publications, magazines and directories will help in increasing the number of possible purchasers, and will help in educating the intermediary in the nature of your business.
• Keep your intermediary in the loop. Hopefully, at some point, a letter of intent will be signed and the deal turned over to the lawyers for the drafting of the final documents. Now is not the time to assume that the intermediary's job is done. It may just be beginning as the details of financing are completed and final deal points are resolved. The intermediary knows the buyer, the seller, and what they really agreed on. You may be keeping the deal from falling apart by keeping the intermediary involved in the negotiations.
• Be open to all suggestions. You may feel that you only want one type of buyer to look at your business. For example, you may think that only a foreign company will pay you what you want for the company. Your intermediary may have some other prospects. Sometimes you have to be willing to change directions.

The time to call a business intermediary professional is when you are considering the sale of your company. He or she is a major member of your team. Selling a company can be a long-term proposition. Make sure you are willing to be involved in the process until the job is done. Maintain open communications with the intermediary. And, most of all - listen. He or she is the expert.

Copyright BBP 2003

Selling Your Business

Follow These Ten Commandments To Avoid Wrecking the Deal

1. Place a reasonable price on your business. Since an inflated figure either turns off or slows down potential buyers, rely on your business broker to help you arrive at the best "win-win" price.
2. Carry on "business as usual." Don't become so obsessed with the transaction that your attention wavers from day-to-day demands, affecting sales, costs, and profits. Since the selling process could take some time, the buyer needs to keep seeing a healthy business.
3. Engage experts to insure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Expert intermediaries can channel the process and the parties involved to keep the sale within safely silent bounds.
4. Prepare for the sale well in advance. Be sure your records are complete for at least several years back and do all pertinent legal or accounting "housecleaning" - as well as a literal sprucing-up of the plant or store.
5. Anticipate information the buyer may request. In order to obtain financing, the buyer will need appraisals on assets, such as real estate, as well as information to satisfy environmental regulations (when real estate is concerned).
6. Achieve leverage through buyer competition. This can be tricky; you are wise to let your business broker, as a third party, create a competitive situation with buyers to position you better in the deal.
7. Be flexible. Don't be the kind of seller who wants all-cash at the closing, or who won't accept any contingent payments or an asset transaction. Depend on the advice of your business broker - their knowledge of financing and tax implications - to keep the deal sweet instead of sour.
8. Negotiate; don't "dominate." You're used to being your own boss, but be prepared to learn that the buyer may be used to having his way, too. With your business broker's help, decide ahead of time when "to hold" and when "to fold,"
9. Keep time from dragging down the deal. To keep the momentum up, work with your business broker to be sure that potential buyers stay on a time schedule and that offers move in a timely fashion.
10. Be willing to stay involved. Even if you are feeling burnt-out, realize that the buyer may want you to stay within arm's reach for a while. Consult with business brokers to determine how you can best effect a smooth transition.

Copyright BBP 2003

Selling Your Business - Some Key questions - and Answers

Selling your business is a major decision! You have devoted your time, money and energy to building, running and operating your business. It may well represent your life's work. You have decided that now is the right time to sell, and you want the very best professional guidance available. This is when working in tandem with a professional business broker can make the difference between just getting rid of the business and selling it for the very best price and terms.

Below are some of the most common questions asked by sellers. The responses are based on both experience and knowledge. If you have questions of your own, ask your business broker professional.

What can business brokers do -- and what can't they do?

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

A business broker professional is not, however, a magician who can sell an overpriced business. Most businesses are saleable if priced and structured properly. Sellers have to understand that only the marketplace can determine what a business will sell for. The amount of the down payment a seller is 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.

How long does it take to sell my business?

It generally takes, on average, between five and six 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 the business brokerage firm has 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 asking 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 - and support the buyer and his or her family.

Why is seller financing so important to the sale of a business?

Surveys have shown that a seller, who asks for all cash, receives on average only about 70 percent of the asking price, while sellers who accept terms receive on average 86 percent of their asking price. In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of a business selling increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.

What happens when there is a buyer for my business?

When a buyer is sufficiently interested in your business, the business broker professional can help in the preparation of an offer or proposal. This offer or proposal may have one or more contingencies. Usually, they concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one) or other pertinent details of the business. The buyer's proposal will be presented to you for your consideration. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer's proposal, the buyer could withdraw it at any time.

Your business broker professional will submit all offers to you for your consideration. At first review, you may not pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, "The first offer is generally the best one the seller will receive." This does not mean that you should accept the first, or any offer -- just that all offers should be looked at carefully.

When you and the buyer are in agreement, the business broker will work with both of you 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. Your business broker professional will work with you throughout the entire sales process.

What can I do to help sell my business?

You can cooperate fully with your business broker professional and any other advisors that you are using. A buyer will want up-to-date financial information. If you use accountants, you can work with them to make current information available. If you are using an attorney, make sure he or she is familiar with the business closing process. You might also ask if their schedule will allow them to participate in the closing on very short notice. If you and the buyer want to close the sale quickly, usually within a few weeks, (unless there is an alcohol or other license involved that might delay things), you don't want to wait until the attorney can make the time to prepare the documents or attend the closing. Time is of the essence in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal.

And, finally, your team of advisors must all be working towards the common goal of selling your business for the best price and terms available in the marketplace, and closing the sale as quickly as possible. Only by being as cooperative as possible with everyone involved can your business interests best be served.

Copyright BBP 2003

Selling Your Business - What's the Reason?

There was study done, years ago, that showed that the reason businesses were for sale had a direct relationship to its probability of sale.

The above results point out the more serious or valid reason for sale, the higher likelihood that the business will sell. Despite its age the results today would probably be more dramatic. Most of those looking for a business to purchase in today's market would shy away from businesses that are under-capitalized, showing insufficient profits or any in which the seller was just attempting to sell for profit only. Today's buyer is better educated, has more knowledge about business and is more wary than his or her predecessor. The financial records better be complete, all information available - and the seller must have a valid reason for sale.

It is evident from the results above that such reasons for sale as: retirement, health issues, family problems followed by "burnout" have the highest probability of sale. Burnout is not a new issue, but it is generally preceded by many years of doing the same thing. It's difficult to accept burnout from a seller who has been in business for only a short time.

There is an old saying among business brokers and that is that it takes a willing seller - and a willing buyer to complete a successful sale. The moral of all this is that the more valid the reason for sale, the better the chance the business will sell quickly - and without undue problems.

Copyright BBP 2003

Selling Your Business Yourself? NOT a Good Idea

The independent business owner who decides to sell is at the threshold of a major process involving the emotions as well as the marketplace. In many cases, the business for sale represents the seller's life work. Being the independent type to begin with--as well as someone who knows about deals and sales--the tempting notion sometimes arises: Why don't I handle the sale of my business myself? Those sellers with similar temptations should first take a look at the steps necessary for the successful business sale--and at the advantages of taking those steps in tandem with the best possible professional guide.

Preparing the business for sale

What looks good or just fine to the seller could make quite the opposite impression on prospective buyers. The weathered sign out front that the seller thinks is "rustic" might strike a buyer as in need of a fresh coat of paint. On the other hand, improvements planned by the seller may be either unnecessary or wrongly-conceived. In either case, sellers would be wise to rely on the advice of a business broker--a professional with experience in dealing regularly with buyers and with the objectivity required to set the business scene to its best advantage. Of course, preparing a business for sale goes beyond outward appearances. Ultimately, a business will sell according to the numbers. A business intermediary can be invaluable in helping the seller provide financial records that are clear and up-to-date.

Pricing and evaluation.

All sellers naturally want to get the best possible price for their business. However, they also need to be realistic about the true value of the company for sale and to understand that price is, in fact, dictated by the marketplace. To determine the best price, a professional business broker will use industry-tested valuation techniques, including ratios based on sales of similar businesses, as well as the historical data of the type of business for sale.

Marketing and advertising.

The professional business broker is key to the marketing of a business. He or she will prepare a marketing strategy and offer advice about essential marketing tools: everything from a business description to newspaper advertising. Business brokers, through their data bases of buyer prospects, professional associations and other networks, can get the word out about the business far more effectively than any owner could manage on an individual basis.

Presenting the business.

The professional business broker is experienced in handling the typical objections and negative "readings" many typical buyers will raise. Does the business lack parking space? Is its location less than ideal? The business broker has the skills to balance negatives with positives, or to point out that what appears to be a disadvantage is not always the case. In addition to skill, a business broker also offers the seller convenience. Sellers often fail to visualize the number of buyer calls they would have to field if handling the sale on their own. The business owner working with a broker can continue managing his or her business at the same time the selling process is underway.

Negotiating the business sale transaction.

The business broker will be the most vital advisor to sellers during any stage of the sale transaction. Steeped in knowledge about negotating price, terms, and other key aspects of the sale, the broker will guide the seller each step of the way. During the early stages, while the buyer is still considering making an offer, the broker is the ideal person to follow up and keep the deal running smoothly. Sellers working alone could lose bargaining effectiveness by doing the follow-up themselves.

Mastering the paperwork.

Even though business owners handle mountains of paperwork as a part of doing business, few of them have had training in the specialized contracts and forms required for the sale of a business. The business broker is an expert at sales transaction details. This expertise will help guard against delays, problems, and--that worst of all possible worlds--the "wrecked" deal.

Qualifying buyers.

The business broker will determine the right buyer for the right business, focusing on those prospects who are financially qualified and who are genuinely (or potentially) interested in the type of business for sale. For locating and qualifying prospective buyers, a business broker uses computerized databases to access comprehensive lists of local, national and international buyers--all to increase the chances of selling a business at peak value. And, almost as important, to avoid wasting the seller's valuable time.

Maintaining privacy and confidentiality.

When a business broker is involved in the sale, bringing to the business only those prospective buyers who qualify, it is also easier to maintain confidentiality during the selling process. Until a purchase-and-sale agreement has been signed, most sellers do not want the word to reach their customers, competitors, employees, or even their bankers. A business broker helps by using nonspecific descriptions of the business, by requiring signatures on strict confidentiality agreements, by screening all prospects, sometimes phasing the release of information to match the growing evidence of buyer sincerity and trustworthiness.

Professional business brokers provide all these vital services, and more, for the seller of a business. This is one time where "do-it-yourself" just can't measure up--in terms of money, time, and the general success of the sale.

Copyright BBP 2003

Selling Your Business? Follow These Ten Commandments To Avoid Wrecking the Deal.

1. Place a reasonable price on your business. Since an inflated figure either turns off or slows down potential buyers, rely on your business broker to help you arrive at the best "win-win" price.
2. Carry on "business as usual." Don't become so obsessed with the transaction that your attention wavers from day-to-day demands, affecting sales, costs, and profits. Since the selling process could take as long as a year, the buyer needs to keep seeing a healthy business.
3. Engage experts to insure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Expert intermediaries can channel the process and the parties involved to keep the sale within safely silent bounds.
4. Prepare for the sale well in advance. Be sure your records are complete for at least several years back and do all pertinent legal or accounting "housecleaning"--as well as a literal sprucing-up of the plant or store.
5. Anticipating information the buyer may request. In order to obtain financing, the buyer will need appraisals on all assets as well as information to satisfy environmental regulations (when real estate is concerned).
6. Achieve leverage through buyer competition. This can be tricky; you are wise to let your business broker, as a third party, create a competitive situation with buyers to position you better in the deal.
7. Be flexible. Don't be the kind of seller who wants all-cash at the closing, or who won't accept any contingent payments or an asset transaction. Depend on the advice of your intermediaries--their knowledge of financing and tax implications-- to keep the deal sweet instead of sour.
8. Negotiate; don't "dominate." You're used to being your own boss, but be prepared to learn that the buyer may be used to having his way, too. With your business broker's help, decide ahead of time when "to hold" and when "to fold."
9. Keep time from dragging down the deal. To keep the momentum up, work with your intermediary to be sure that potential buyers stay on a time schedule and that offers move in a timely fashion.
10. Be willing to stay involved. Even if you are feeling burnt-out, realize that the buyer may want you to stay within arm's reach for a while. Consult with intermediaries to determine how you can best effect a smooth transition.

Copyright BBP 2003

Selling Your Company - Some Key Points

• Settle all litigation and environmental issues before putting the company on the market.
• Hire a good transaction lawyer because the buyer is also.
• If company owners are totally inflexible, the buyer may walk away from the transaction.
• Be prepared to accept a lower price for lack of management depth, dependence on a small number of customers or clients, and lack of geographical distribution.
• When a buyer indicates he or she may be ready to submit a Letter of Intent, tell them up front what items you want included. For example, price and terms, what assets and liabilities are to assumed, if an asset purchase, what contracts and warranties are to assumed, time schedule for due diligence and closing - these are just some of the items a seller might want included.
• Be advised that many buyers will view the value of Sub Chapter S corporations to be worth less than if the company is a C Corporation.
• Make the company more visible by attending trade shows, tie up patents, copyrights and trademarks, create a public relations program - these areas all create perceived value.
• Selling a company involves sometimes-inconsistent objectives: speed, confidentiality and value - pick the two that are the most important.
• Keep in mind that companies get stale after sitting on the shelf for awhile.
• Don't expect your lawyer to win every point of contention - you want a dealmaker, not a deal breaker.

Copyright BBP 2003