10 Tips for a Successful Sale

1. Sellers should find out the loan value of the fixtures, equipment and machinery prior to a sale. Many buyers will count on using it for loan or collateral purposes. No one wants to find out at the last minute that the value of the machinery won't support the debt needed to put the deal together.
2. Sellers should resolve all litigation and environmental issues before putting the company on the market.
3. Sellers should be flexible about any real estate involved. Most buyers want to invest in the business, and real estate usually doesn't make money for an operating company.
4. Sellers should be prepared to accept lower valuation multiples for lack of management depth, regional versus national distribution, and a reliance on just a few large customers.
5. If a buyer indicates that he or she will be submitting a Letter of Intent, or even a Term Sheet, the seller should inform them up-front what is to be included:
   • Price and terms
   • What assets and liabilities are to be assumed, if it is to be an asset purchase
   • Lease or purchase of any real estate involved
   • What contracts and warranties are to be assumed
   • Schedule for due diligence and closing
   • What employee contracts and/or severance agreements the buyer will be responsible for
6. Non-negotiable items should be pointed out early in the negotiations.
7. The sale of a company usually involves three inconsistent objectives: speed, confidentiality and value. Sellers should pick the two that are most important to them.
8. A PricewaterhouseCoopers survey of more than 300 privately held U.S. companies that were sold or transferred pointed out the most common things a company can do to improve the prospects of selling:
   • Improve profitability by cutting costs
   • Restructure debt
   • Limit owner's compensation
   • Fully fund company pension plan
   • Seek the advice of a consultant
   • Improve the management team
   • Upgrade computer systems
9. Sellers should determine up-front who has the legal authority to sell the business. This decision may lie with the board of directors, a majority stockholder, and a bank with a lien on the business, etc.
10. Partner with professionals. A professional intermediary can be worth his or her weight in gold.

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A Seller's Checklist of Dos and Don'ts

• Do have all of your business documentation ready. Everything starts with it.
• Don't underestimate the value of your business. Owners of privately held businesses usually minimize profits to lower taxes. The financial statements may not reflect the real value of the business.
• Don't overprice your business. The right buyer who is willing to pay the right price may not even want to consider your business because the price is way out of line.
• Do offer as favorable terms as you can. Buyers, even good ones, want to leverage the sale as much as possible.
• Don't use a "magic" formula to value your business. Your business is unique, different from every other business out there.
• Don't wait too long to sell. The best time to sell is when business is good.
• Don't wait until poor health or a downturn occurs - sell from strength!
• Do allow at least six months to sell your business. The larger the business, the more time you should allow.
• Do use a business broker. They can take the mystery out of determining the selling price, prepare a marketing plan of action to maximize the selling price, handle all of the details, and leave you to do what you do best -- continue to run your business.

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Are You Ready To Exit?

If you've gone this far, then selling your business has aroused enough curiosity that you are taking the first step. You don't have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer a lot of your questions and help you through the maze of the process itself.

Question 1

The first question almost every seller asks is: "What is my business worth?" Quite frankly, if we were selling our business that is the first thing we would want to know. However, we're going to put this very important issue off for a bit and cover some of the things you need to know before you get to that point. Before you ask that question you have to be ready to sell for what the market is willing to pay. If money is the only reason you want to sell, then you're not really ready to sell.

*Insider Tip:

It doesn't make any difference what you think your business is worth, or what you want for it. It also doesn't make any difference what your accountant, banker, attorney, or best friend thinks your business is worth. Only the marketplace can decide what its value is

Question 2

The second question you have to consider is: Do you really want to sell this business? If you're really serious and have a solid reason(s) why you want to sell, it will most likely happen. You can increase your chances of selling if you can answer yes to the second question: Do you have reasonable expectations? The yes answer to these two questions means you are serious about selling.

The First Steps

Okay, let's assume that you have decided to at least take the first few steps to actually selling your business. Before you even think about placing your business for sale there are some things you should do first. The first thing you have to do is to gather information about the business

Here's a checklist of the items you should get together:

• Three years' profit and loss statements
• Federal Income tax returns for the business
• List of fixtures and equipment
• The lease and lease-related documents
• A list of the loans against the business (amounts and payment schedule)
• Copies of any equipment leases
• A copy of the franchise agreement, if applicable
• An approximate amount of the inventory on hand, if applicable
• The names of any outside advisors

Notes:

If you're like many small business owners you'll have to search for some of these items. After you gather all of the above items, you should spend some time updating the information and filling in the blanks. You most likely have forgotten much of this information, so it's a good idea to really take a hard look at all of this. Have all of the above put in a neat, orderly format as if you were going to present it to a prospective purchaser. Everything starts with this information.

Make sure the financial statements of the business are current and as accurate as you can get them. If you're half way through the current year, make sure you have last year's figures, and tax returns, and also year-to-date figures. Make all of your financial statements presentable. It will pay in the long run to get outside professional help, if necessary, to put the statements in order. You want to present the business well "on paper". As you will see later, pricing a small business usually is based on cash flow. This includes the profit of the business, but also, the owner's salary and benefits, the depreciation, and other non-cash items. So don't panic because the bottom line isn't what you think it should be. By the time all of the appropriate figures are added to the bottom line, the cash flow may look pretty good.

Prospective buyers eventually want to review your financial figures. A Balance Sheet is not normally necessary unless the sale price of your business would be well over the $1 million figure. Buyers want to see income and expenses. They want to know if they can make the payments on the business (more on this later), and still make a living. Let's face it, if your business is not making a living wage for someone, it probably can't be sold. You may be able to find a buyer who is willing to take the risk, or an experienced industry professional who only looks for location, etc., and feels that he or she can increase business.

*Insider Tip

The big question is not really how much your business will sell for, but how much of it can you keep. The Federal Tax Laws do determine how much money you will actually be able to put in the bank. How your business is legally formed can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership or proprietorship? If you are incorporated, is the business a C corporation or a sub-chapter S corporation? There are some new tax rules, effective January 1, 2000, that impact certain businesses on seller financing. The point of all of this is that before you consider price or even selling your business it is important that you discuss the tax implications of a sale of your business with a tax advisor. You don't want to be in the middle of a transaction with a solid buyer and discover that the tax implications of the sale are going to net you much less than you had figured.

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Be a Winning Seller:
Good Negotiation is the Key

You've made the big decision to put your business on the market. Your reasons for selling are valid, carefully-considered, and "good" - the kind that won't make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You'll come up with a price - maybe a little high, but why not? - and let gut instinct (an attribute common to successful business owners) lead the way.

Wait just a minute. Or maybe a quarter of an hour; however long it takes you to bone up on your negotiation skills with the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business.

Gather Your Forces

The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as tactics for marketing the business. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal income tax returns, a list of fixtures and equipment, copies of equipment leases (if any), the lease and any lease-related documents, a copy of your franchise agreement (if applicable), lists of loans (if applicable), with amounts and payment schedule, an approximate tally of inventory on hand, and the names of any outside advisors (attorney, accountant, etc.) you plan to consult.

Be Market-Smart

It's vital to have a clear and realistic notion about the value of your business. Pricing your business intelligently is as important as impressive financial records. Your business broker will apply industry-tested valuation methods, including ratios based on the sales of similar businesses, as well as the historical data that most closely matches your type of business. He or she will also incorporate intangibles to insure that the business will not be underpriced. At the same time, your broker will make sure you understand how the price is dictated by the marketplace and that realistic pricing is an absolute must. Most buyers won't wait for an outsized price to drop - they will just go somewhere else.

Know Your Buyer

Finding the right buyer may be more important than getting that extra-high asking price. Your business broker will determine the right buyer for the right business, focusing on those prospects who are financially qualified and are genuinely interested in your type of business. It's important also to know something about the bargaining power of the buyer and to discover early on how he or she plans to finance the purchase of your business. Your business broker will do that and more: he or she will anticipate the buyer's concerns and counsel you about being up-front about any problems that might make a buyer suspicious and therefore unnecessarily adversarial during the negotiation process. Steeped in knowledge about negotiating price, terms and other vital aspects of the sale, the broker will guide you 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. Working alone, you could lose bargaining effectiveness by doing the follow-up yourself. And, in general, having someone else negotiate on your behalf is the smartest way to go. The "middle man" can get your thoughts across, keeping you at a distance from the words themselves.

Be Flexible

In negotiating the sale of your business, you need to keep the ball rolling once an offer has been presented. Study it closely, and don't automatically despair. Just because you didn't get your asking price doesn't mean that the offer has nothing to commend it. It may have other points to offset what you feel is a low figure, such as - if the deal is to be seller-financed - higher payments or interest, a consulting agreement, more cash than you anticipated, or the promise of a buyer relationship that will make life easier. In evaluating an offer, take the long view and look for the ways in which the offer just might accomplish your objectives. Above all, don't think in terms of "punishing" the buyer because of a low offer. This is the worst reason for rejecting an offer - and certainly a self-defeating one for you.

Beef Up Bargaining Power

The best negotiating weapon is to have options available. For the seller, the mightiest one is lack of desperation. With any luck, you have not waited too long to sell and your business is sound. Carry this a step further: be sure, in preparing to sell, that you don't let the business slip. It's important that prospective buyers see your business at its best - bustling, and showing no signs of neglect. You should, for example, keep normal operating hours, repair signage and other first-impression areas of the business, repair or remove non-operating equipment, remove items not included in the sale, maintain inventory at constant levels. Make it obvious that you have not been forced to sell, and that - if necessary - you could refuse all offers and carry on the operation of your business. This may be the last thing you want to do, having made the hard decision to sell, but the buyer won't know that.

Master the Art of Good Timing

Timing is crucial to the successful sale of a business. Any deal has a shelf-life, and it will go stale if it sits around too long. On the other hand, sometimes ideas need extra time to jell - and people sometimes need a little time-and-space to be more objective about their own positions. Your business broker will keep the process moving at the proper pace. He or she will also provide or offer advice about the specialized contracts and forms necessary for the completion of the sale.

In negotiating the sale process, you will benefit many times over from the guidance of a business broker professional. The business broker represents you, the seller, and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to you. The broker will also present and assess offers and, at the appropriate juncture, he or she can help in structuring the sale and negotiating its successful close - helping to create a win-win situation for everyone involved.

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Common Seller Questions

How long does it take to sell my business?

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 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.

Why Is Seller Financing So Important To The Sale Of My Business?

Surveys have shown that a seller, who asks for all cash, receives on average only 70 percent of their asking price, while sellers who accept terms receive on average 86 percent of their asking price. That's a difference of 16 percent! In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of 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, he or she will, or should, submit an offer in writing. 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. 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 can withdraw it at any time.

At first review, you may not be 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, 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 I Do To Help Sell My Business?

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. 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.

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

Business brokers are the professionals who will 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. 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.

A business broker is not, however, a magician who can sell an overpriced business. 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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Do You Have an Exit Plan?

"Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business." From: Selling Your Business by Russ Robb, published by Adams Media Corporation

Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know!

The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and procedures.

The plan should start with outlining the circumstances under which a sale or merger might occur, other than the obvious financial difficulties or other economic pressures. The reason for selling or merging might then be the obvious one - retirement - or another non-emergency situation. Competition issues might be a reason - or perhaps there is a merger under consideration to grow the company. No matter what the circumstance, an exit plan or procedure is something that should be developed even if a reason is not immediately on the horizon.

First, any existing agreements with other partners or shareholders that could influence any exit plans should be reviewed. If there are partners or shareholders, there should be buy-sell agreements in place. If not, these should be prepared. Any subsequent acquisition of the company will most likely be for the entire business. Everyone involved in the decision to sell, legally or otherwise, should be involved in the exit procedures. This group can then determine under what circumstances the company might be offered for sale.

The next step to consider is which, if any, of the partners, shareholders or key managers will play an actual part in any exit strategy and who will handle what. A legal advisor can be called upon to answer any of the legal issues, and the company's financial officer or outside accounting firm can develop and resolve any financial issues. Obviously, no one can predict the future, but basic legal and accounting "what-ifs" can be anticipated and answered in advance.

A similar issue to consider is who will be responsible for representing the company in negotiations. It is generally best if one key manager or owner represents the company in the sale process and is accountable for the execution of the procedures in place in the exit plan. This might also be a good time to talk to an M&A intermediary firm for advice about the process itself. Your M&A advisor can provide samples of the documents that will most likely be executed as part of the sale process; e.g., confidentiality agreements, term sheets, letters of intent, typical closing documents. The M&A advisor can also answer questions relating to fees and charges.

One of the most important tasks is determining how to value the company. Certainly, an appraisal done today will not reflect the value of the company in the future. However, a plan of how the company will be valued for sale purposes should be outlined. For example, tax implications can be considered: who should do the valuation, are any synergistic benefits outlined that might impact the value, how would a potential buyer look at the value of the company?

An integral part of the plan is to address the due diligence issues that will be a critical part of any sale. The time to address the due diligence process and possible contentious issues is before a sale plan is formalized. The best way to address the potential "skeletons in the closet" is to shake them at this point and resolve the problems. What are the key problems or issues that could cause concern to a potential acquirer? Are agreements with large customers and suppliers in writing? Are there contracts with key employees? Are the leases, if any, on equipment and real estate current and long enough to meet an acquirer's requirements?

The time to address selling the company is now. Creating the basic procedures that will be followed makes good business sense and, although they may not be put into action for a long time, they should be in place and updated periodically.

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Don't Let Sleeping Dogs Lie

If you're considering selling your business, and you are employing a professional business broker or intermediary, it's imperative to be absolutely open with him or her. This is not the time for secrecy -- or even for subtlety, especially when it comes to problems. If you've been having trouble with your lease, one of your best customers or your fixtures and equipment, spell it out! Any one of these "sleeping dogs" is bound to wake up sometime during the process. After the first growl comes the bite. The sale will get buried deeper than last year's bone. And the buyer, scared off by the ruckus, will have long since disappeared.

Tell your broker all there is to know prior to the beginning of the marketing effort. Your broker and the buyer are aware that there is no such thing as a perfect business, and buyers are much more likely to deal with the problems of your business during the decision-making process rather than after they have decided to buy.

And it's not just the sale that's at stake. Concealing a problem or defect that adversely affects the business can lead to litigation and years in court. It's not worth it. Problems and defects don't mean your business won't command an attractive price. Your professional business broker is prepared to deal with these issues and give you competent advice.

Some sellers try to hide the problems of their business and hope the sleeping dog never wakes up. You'd be well-advised to get him on a good, strong leash instead of letting him "lie."

The Lease - Buyer and Seller Beware!

The lease is an important issue in many cases, a major issue. Whether you are buying or selling a business, it's important to understand that if the real estate is not included, the lease is a critical element of the sale process. Other than owning the real estate, there are only three ways the transfer of the business can be handled:

1. A new lease - A new lease can be entered into by the lessor and the new tenant, the buyer.
2. A sub-lease - This can be negotiated between the seller and the buyer. In a sub-lease, the seller of the business becomes the landlord. The existing landlord, who most likely is also the owner of the property, must always approve a sub-lease. In a few cases, the existing lease provides that the tenant has the right to sub-lease.
3. The assignment of lease - This is the most common method of transferring the lease. The seller simply assigns the existing lease to the buyer. The buyer assumes responsibility for the lease, and in most cases, the landlord must approve the assignment. Sellers should be aware, however, that in most cases, they are still responsible for the terms of the lease.

Sellers should take a look at the lease at their business and ask themselves the following questions:

• Is the lease long enough and the rent low enough to make the business attractive to a potential buyer?
• Is the rent consistent with similar businesses in the area?
• Are there any terms or conditions of the lease that might be unfavorable in the eyes of a possible buyer?
• Most importantly, are you on good terms with the landlord - and can the lease be transferred without any hitches?

If there could be any problems with the lease, or the landlord, it's best to resolve them prior to selling the business. Your business broker professional is a good source to review the lease and its terms from a business sale perspective.

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Don't Sell Before You're Ready

The buyer and seller have both agreed on the sale price and the terms of the transaction. Everyone appears satisfied. As the day of closing approaches, the seller seems less cooperative and more apprehensive about selling the business. Ultimately, the sale falls apart. Who's to blame? The buyer was ready, willing and able to buy the business, and the seller appeared ready to sell.

The decision to sell one's business is a serious step - a milestone in one's life, both personally and professionally. Selling represents the end of ownership. It means, for many sellers, heading into uncharted waters. For others, it is the end of a dream -- they built the business, or perhaps even started it. A part of them will always be in the business. So, to the seller, selling the business, represents the end of something and the beginning of something else - pretty dramatic stuff. Often, selling the business means parting with one's biggest asset - the bulk of one's wealth. The business can be a very personal thing, like a child is a part of the family.

Some sellers, in the middle of the selling process, suddenly realize just how important the business is in their life. Others realize that after the sale they will have nothing to get up for on a daily basis. This sounds good at first, but upon reflection it really doesn't sound good at all. These are some of the reasons sales of privately-held businesses may not close. Sellers won't admit their reason, so they masquerade the real reason behind another.

Perhaps, one of the most critical elements necessary for the successful sale of a privately-held business is the willingness of the seller to sell and move on. In some cases, the owner and the business have grown into one - the business becoming his or her alter ego. Before sellers decide to sell, they should make sure they can separate themselves from the business and are prepared to leave it. Sellers should not attempt to sell before they are ready!

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Don't Take the Lease for Granted

The cliché is that the key to business success is: location - location - location. If you own a business in which the location is an important reason for the success of the business, and you are considering selling, then the lease is a very critical issue in the sale. The time to deal with this is not in the middle of a sale, but before you even place the business on the market.

Business brokers can recite many a story where, on contacting the landlord in the midst of a pending sale, they are told that the landlord has other plans for the space when the lease is up next month. Fortunately this is not a common occurrence, but if the lease is an issue, the time to deal with it is now.

The Steps In Dealing with the Lease

The first step is finding the lease.

The second step is to read it.

The third step is to visit the landlord and work out any lease issues.

Before placing your business on the market, you need to see where you stand on the all-important issue of the lease. After reviewing it, set up an appointment to visit the landlord. If there are only a few years left on the lease, see about getting an extension. If you have more than that left, still check into getting an option to renew the lease at the expiration of the present term. After all, if the location works, the longer the lease the better in most cases. It might also be a good time to see if the landlord has ever considered selling the premises. By owning the property, you will never have to worry about leases again.

If location is not important and the business is such that moving it is a non-issue, then obviously the lease is not important. However, if the business is one that is dependent on its existing location, then the lease issue is crucial. The time to iron out any details is before the business is placed on the market.

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Finding a Buyer is Just the Beginning

Many people who are selling their business think that once they find a buyer the business is sold. Unfortunately, the real work is just beginning. Once a buyer is interested, there are the inevitable questions that must be answered. After the questions are answered and the buyer has satisfied himself or herself that the financial aspects of the business are satisfied, the buyer is probably ready to make an offer.

An offer is prepared and it generally contains contingencies or conditions on which the offer is subject to, in addition to offering the price and terms under which the buyer is prepared to pay. Assuming the price and terms are acceptable to the seller, the next step is for the seller to do what is necessary to satisfy the contingencies. These can be as varied to the buyer's reviewing all of the seller's financial books and records, a serious look at the lease and its terms to a requirement that the seller pave the parking lot or redo the rest rooms.

Definitions

Offer -- an expression of willingness to purchase a property [business] at a specific price [and terms].

Contingency Clause--see Condition

Condition(s)- provision(s) in a contract that some or all terms of the contract will be altered or cease to exist upon a certain event.

Conditional Offer- purchase contract tendered to the seller that stipulates one or more requirements to be satisfied before the purchaser is obligated to buy.

Dictionary of Real Estate Terms, published by Barron's Real Estate Guides

The first task for the seller is to accept the price and terms then review the contingencies to insure that they are reasonable and acceptable. If the price, terms or contingencies are not acceptable then a counter-offer is prepared and the terms that are acceptable to the seller presented to the buyer. Once the parties agree upon all of these items, then the job of satisfying the buyer's contingencies is begun. A time period in which all of this must be done is usually specified in the offer. If such a time period was not specified, the buyer could take his or her "own sweet" time before approving - or not. The seller obviously has to furnish the materials and information necessary for the seller to satisfy himself or herself.

If the buyer is satisfied that everything is as represented, he or she signs what is termed a Contingency Removal form. If everything is not satisfactory to the buyer, then the offer can be renegotiated or the sale falls apart and the buyer's deposit is returned and the seller is now back to square one!

Unfortunately, a lot of time can elapse between the offer and acceptance and the buyer deciding to move forward. Time is the essence of the deal and the longer it goes the more likely that serious problems can develop. If these problems are not addressed promptly, the pending sale can fall apart and then the seller must then look for another buyer and begin the process anew. The professional broker is aware of all of this and can greatly assist the seller in making sure that only serious and committed buyers begin the process.

Let's assume that the buyer and seller are in agreement on price and terms. Now comes the task of gathering all of the information necessary for an escrow company or closing attorney to draw the necessary paperwork. The seller must also gather the lease information, insurance data, equipment lists, inventory information and everything else necessary to close the sale.

If the buyer is using outside financing, then the seller, along with the buyer, must gather all sorts of financial date to submit to the lender. There are also the various representations and warranties the must be reviewed - and approved, by the parties involved.

As one can see, the path from finding a buyer to the closing of the sale is an arduous one and fraught with problems every step of the way. Only an experienced professional business broker can guide both parties through the maze and insure that every step is addressed and covered satisfactorily.

Sellers - Here's How Selling Your Business Can be Made Easier

If you're considering selling your business consulting with a professional business broker is your first step. They can assist in all of the areas mentioned in this newsletter. In addition they can do the following:

• Greatly increase the number of potential buyers through their own databases and the various Web sites available to them.
• Help in pricing the business so it will be competitive in the marketplace.
• Will keep you advised on market reaction.
• Present only qualified and serious buyer prospects.
• Handle the details so you can spend your time operating your business.
• Coordinate all of the paperwork so the sale can be expedited quickly and easily.

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How Long Does it Take to Sell A Business?

Some recent studies have revealed that the time it takes to sell a small business has increased dramatically over the years. For example, in 1978 the average time it took was only 57 days. In 2001, the average length of time was 225 days. That means that it now takes almost four times as long to sell a business as it did 23 years ago. The intervening years show the gradual increase in the time necessary to sell a small business. Why has this time factor increased? Here are just a few of the reasons:

• Buyers are better educated and informed
• Buyers are more reluctant to make that leap of faith so necessary to go into business for oneself
• Buyers require more information from a seller
• Buyers and sellers use more outside advisors
• Requirements for the closing have increased due to more governmental regulations

There are obviously additional reasons depending on the nature of the business, complexity of the deal, buyer and seller cooperation and the time schedule of the advisors in the transaction.

Sellers can assist in the process by gathering all of the information prior to going to market. For example, such items as: an equipment list, lease information, tax data, list of licenses and permits, any existing loans, leases and equipment debt, plus any other documentation that a prospective buyer might want to review, or any documents that might be helpful in drawing closing papers.

In this age of technology, it is difficult to believe that it actually takes longer to close the sale of a business than it did 23 years ago. In this age of fax machines, Email, computer technology, cell phones, it must be a people problem. Buyers and sellers can help by making sure they are proceeding as quickly as prudently possible, providing the necessary documentation on a timely basis, making sure their outside advisors do the. paper work expeditiously. A business broker moves this process along by making sure that everyone involved is doing what is necessary to get the deal done. Everyone involved in the transaction must remember that time is of the essence.

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Is This the 'Right Time' for You?

If you have made the decision to sell your business, the wisest first move in 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.

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Is This the Right Time to Sell?

"Whatever the reason, there should be something other than dollars that motivates you to explore a sale. After all, if it weren't more valuable to own the business than to sell it, no one would ever buy it."

Mike Sharp, M&A Today, November 2002

The owner of a successful company is considering selling, thinking now may be a good time. However, he is told by an outside advisor that business is good and that if he holds on to it for several more years he will get a much higher price. On the surface, this makes a lot of sense. After all, when an advisor tells the owner that if he keeps it for three more years and the price will double, that's a terrific incentive to keep plugging away. However, there is another side to what would appear to be sound advice.

The most dramatic downside would be that the business could go downhill rather than uphill as the advisor predicted. Although no one can predict what the economy will do, there are a couple of possible scenarios. The industry itself might be impacted by some new technology or other companies might enter the field. It is also possible that the owner, having considered selling, is just worn out and can't or won't maintain the zeal necessary to keep the business competitive. After all, after many years of running the business, the owner may be tired, "burnt out," or just plain ready to slow down

There are other areas to consider as well. For example, equipment may need upgrading or replacement, products or services may be aging and need revitalizing. Additional capital may be necessary to keep the company up-to-date and competitive. Leases may be expiring and long obligations required to renew them. In short, what originally looked like a good strategy to increase the selling price, has backfired. The costs of continuing to operate the business have increased dramatically, the owner has lost interest - and now the company is offered for sale.

The right time to sell may be when the company's industry, product line or service is at or near the height, of its success. There comes a point when the business or its industry is peaking and everyone wants "in" - and that is the time to sell. There is the old story that the time to sell the buggy whip business was just before Ford started producing the Model-T. As they say, "timing is everything."

The right time might be when the company is at the top of its game. Sales are robust and growing, the balance sheet is squeaky clean, and the employees are productive and happy. Another good time to sell is when there is a solid buyer who is seriously interested in purchasing the company, or perhaps, when a manager within the company is ready to take over in a buy-out of some form.

So, when is the right time to sell? Perhaps when the owner first decided it might be time. However, there is really no best time to sell. No one can tell the owner when it is the time to sell. Outside advisors are well intended, but no one knows when it is time except the owner. And, when it's time - it's time!

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Planning the Presentation:
Five Ways To a Better Sell

Selling--a product, a service, a concept--is the backbone of every business. After careful background work, such as prospecting for and qualifying buyers, comes the big moment: the sales presentation. Although most independent business people know the importance of presentation in successful selling, day-to-day operational demands can dull even the sharpest technique. To keep your selling talents well-honed, check the essentials in these five guidelines:

1. Put Your Best Foot Forward...

In this era of "Casual Friday" dressing, it never hurts to remember the obvious: dress for success. Even if you know your prospect will be wearing jeans and a sweatshirt--you'll make your sales presentation in a suit or as close to a suit as you can get. (For men, a sport coat could be substituted for the suit coat; for women, the suit could be replaced by a dark, simple dress.) Check that your briefcase is well-organized--before you open it with a flourish, the prospect looking on!

2. Start With a Light Touch...

Today's consumers are not impressed by blockbuster tactics. In addition to the right product or service, they are looking for the human angle: honesty, dependability, and--very important to the first moments of the presentation--a common bond. If you are making your sales presentation at the prospect's place of business, look around and find something to comment on. (If the prospect has come to you, revise accordingly.) Photographs and diplomas on walls are good bets, but avoid the too-personal ("Those your beautiful wife and kids?"). Aim for something to indicate you are a kindred spirit ("I see you're a Purdue graduate . . . how are those Boilermakers doing this year?"). The caution here: don't talk too long in this vein and don't lose sight of its main purpose: to relax the prospect--and yourself.

3. Ask the Right Questions...

You may have thought you had the prospect pegged before the sales call, but now you are in a position to find out more. Don't be afraid to ask the right--and sometimes hard--questions. To avoid wasting time and effort on both sides, there are at least two issues you need to get on the table right away: money and authority.

First, the money: does the prospect have the financial resources available to pay for your product/service? Of course, your question will be couched more in these terms: "What area are we dealing with here, dollarwise?" or (more formally) "Let's talk about the budget you have in mind for this type of project." Anyone who is seriously interested in buying will not be offended by the mention of money. The truly worthwhile prospect will be expecting such a discussion, in fact.

Next, comes the question about authority: is this prospect the person with decision-making power? You might put this more delicately as follows: "It's good of you to give me this chance to talk about our product [service]. Would you like anyone else to be in on this, or--assuming you like what you see--can you yourself make the decision to go with us?" If there are other parties needed, tactfully request another meeting (being sure to include this prospect out of courtesy) and begin to wind the sales call down.

Answers to either or both of these questions might be evasive. Don't get road-blocked by vague answers and promises. If, for example, the vague answer is: "Let us think about it," you might answer: "What specifically will you be focusing on?" If an answer is "This is very impressive," you could ask (with a certain amount of humor): "Impressed enough for me to take that order right now?"

4. Shine the Light on Benefits...

Why does anybody buy anything? Because they want something that will do something for them. A benefit. You may be in love with the buttons and switches, the colors and patterns of your product, but the consumer is going to be more interested in the benefits. This doesn't mean you skip the facts--just be sure to connect them directly to what the consumer will gain.

After pointing out benefits, you should be prepared to back up your "claims." If your product lends itself to demonstration, do so. If a sample of your product will help sell it, offer the sample (or a free trial period of a service). Do you have a convincing roster of satisfied customers? Have on hand their testimonials--better still (with prior permission), invite the prospect to go with you to visit a satisfied customer and see the results for him/herself.

5. Call for Action and Final Words...

All right. You've impressed the prospect with your congeniality, your qualifying savvy and general professional approach. You've shown and proven benefits. The prospect is definitely interested but not exactly perched on the edge of the chair. You must now arouse a sense of urgency, a need to heed your "call for action." Your message must be to act now, for any of these reasons: the supply is limited or seasonal or a special of some kind; the best price is the one on offer today and maybe never again; the service desired must be scheduled at this moment because of other commitments that might get in the way. No matter how pleasant it turns out to be, a presentation is not a social call. It means business, and good business--if you do it right.

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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

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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.

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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.

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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.

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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.

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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?

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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.

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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.

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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.

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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

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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.

Reason for Sale	%Reason for Sale	%Probability of Sale
Retirement	10 -- 15%	30 -- 35%
Health Problems/Death	15 -- 20%	25 – 30%
Partnership & Family Problems/ Divorce	5 – 10%	15 – 20%
Burnout/Other Business Investments	15 – 20%	15 – 20%
Under-capitalization	20 – 25%	10 -- 15%
Insufficient Profits	20 – 25%	5 – 10%
Profit Motivated Only	5 – 10%	0 – 5%

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

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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

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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

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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

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Surveying the Business Scene: How Many Sell?

One of the most frequently-asked questions by those looking at the independent business scene is: "How many are for sale?" Right on the heels of that question comes another: "How many actually sell?"

To determine how many of these businesses are for sale at any one time, and what percentage of these get sold, it is necessary first to define terms by business category. The industry groups that account for the majority of small to mid-sized business sales are: manufacturing, wholesale trade, retail trade, business and personal services, and household/miscellaneous services. Using these categories as components, the total number of businesses that apply to our "survey" is approximately 6.3 million.

Of this total, businesses that are for sale at any one time account for roughly 20 percent. There is naturally going to be a higher percentage of businesses for sale that employ four or less workers, but some independent business experts feel that fewer of these businesses--at least percentage-wise--sell than do the larger ones. Of those businesses with four or less employees, one expert's estimate is that one out of six actually sells; with five to nine employees, about one out of five sells; and the trend continues.

Why is the actual-sale percentage lower for very small businesses? Many factors operate to affect this tendency. For example, the much smaller business may suffer more from unsubstantiated income or inaccurate financial information. Some owners may not be realistic in their pricing or simply aren't serious about selling (problems that can threaten the sale of a business at any level). Still others may simply pay the bills and close the doors.

However, no matter what the percentages show, a business owner considering putting a company on the market should remember this: most businesses are salable if the seller is realistic in assessing value and is aware that the marketplace is the final arbiter of the selling price.

Copyright BBP 2003

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Ten Mistakes That Sellers Make!

1. Not knowing what the business should sell for

One of the most costly errors a business owner can make is not knowing the approximate price of his or her business prior to entering the selling process. Although the marketplace ultimately determines the final price, an owner needs to know what the approximate price his or her business is prior to placing the business on the market. Before making the decision to sell, owners should work with someone qualified to place a price on their company.

An experienced business broker has both the technical ability and the market experience to produce the most realistic pricing opinion. The business broker will also be the only alternative for supporting his or her opinion by selling the business.

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

2. Not preparing the business for sale

Determining the starting price point is only the first step. Prior to exposing the business to the marketplace, preparation is necessary. A business is certainly not a house, but the same attention to appearance prior to sale is necessary. Financial and legal affairs should be current. Anything a potential purchaser might want to see should be up-to-date, accurate and available for review.

Momentum is very important in business transactions and can make or break a deal. The constant need to develop information for a serious prospect will destroy momentum and with it, possibly, the deal. Demonstrating preparedness places the business in a favorable light and prospective buyers will feel comfortable that everything is in order. Being unprepared can delay a closing, create costly expenditures to play catch-up, and cause prospective purchasers to lose confidence in the deal itself. Too much time almost always works against the deal happening.

3. Not being able to see their business through the eyes of a buyer

This can be very difficult for any seller. It is only natural to see one's own business in a most favorable light and overlook the blemishes or problems inherent in any business. Sellers have to approach their business realistically, knowing that a potential buyer will be doing the same. By recognizing the deficiencies of their business, sellers are in a much better position to deal with the concerns of the buyer. In fact, the best way to handle any potential problem areas is to bring them up in the very beginning.

4. Not really knowing the buyer

The better you know the buyer, the smoother the transaction. By knowing the buyers, their motives, their interests and their backgrounds, the better equipped a seller is to make informed decisions about whether they are the right people to operate the business. When final negotiations begin, knowing the buyers can help resolve some of the issues that will arise. Are their interests the same as yours? If you, as the seller, are financing the deal, do you feel confident that they can make the payments? The more you know about why a buyer wants to buy your business, the better position you are in to know when to be firm in the negotiations and when to be flexible.

5. Trying to sell the company to a buyer who doesn't want to buy

There are usually many more potential buyers than there are businesses for sale. The question is -- how serious are they? A buyer may indicate a great deal of interest but when it gets down to the wire, he or she may back out of the deal. Some buyers want to buy only on their terms and conditions, some may have too many decision-makers to please, and others only want to buy the "perfect" business. Wasting time on those who aren't serious about purchasing a business takes away valuable time from those buyers who really want to buy.

6. Being your own worst enemy

Many business owners feel that no one knows their business like they do. They think they can do a deal by themselves. They don't need, or want, any help. They think they are lawyers, accountants, business brokers and outside advisors all rolled up into one person. Then when the going gets tough, they become impatient and inflexible. They then blame others, usually the buyer, when the deal blows up. As the old saying goes: "The attorney who represents himself has a fool for a client." The same could be said for the business owner who thinks he can sell his or her own business. Not using outside advisors, such as a professional business broker, is a serious mistake.

7. Not understanding the structure of the deal

Regardless of the size of the deal this could be the scenario: an offer is presented, the seller takes one look at the price, immediately says "no" and refuses to look any further. The price, within reason, is immaterial. The real crux of the deal is how it is structured. Consider the negotiating axiom "You can name the price if I can name the terms." The terms and conditions are important. A seller may be ecstatic about price only to find that the devil is in the details.

8. Not being able to walk away from the deal

Too many sellers get so involved in trying to put a deal together that they don't see the big picture. They don't realize that the deal isn't a good one. In other words, it's time to walk away from the deal and go on to the next one. Many sellers don't want to let the deal get away. Since they have invested a lot of time and effort, and probably expenses, it's often difficult to just end it. However, in some cases that's exactly what must be done. If the deal isn't right, and can't be fixed, there is no other choice. It's much better not to do the deal than to do a bad one!

9. Waiting too long to sell

Too many owners wait until the last minute to decide to sell their business. They wait until business is down, or they are completely burned-out," or their business partnership has soured completely. The time to sell is before the emergency happens. The time to sell is when business is good. The time to sell is prior to when exasperation hits. The old adage is that a business owner should think about and plan the eventual sale of the business the day after it is started or purchased.

10. Changing your mind

The sale is progressing nicely, the buyer is happy and the seller well, the seller is contemplating life without the business. He or she realizes that when the business is gone, they will have nothing to do. The business has been a major part of their life for many years. Just before the closing, the seller decides that he or she can't live without the business and the deal starts to unravel. Sometimes, seller's remorse arises because a business acquaintance says the price was too low, or there isn't enough cash involved or offers some other uninformed reason. If it was a good deal in the beginning, don't let well-meaning outsiders influence the sale. And, if there is even a speck of doubt about selling the business, don't begin the process. Wait until there is not one shred of doubt.

Copyright BBP 2003

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Ten Steps to the Successful Sale of a Business

1. Make sure you have a valid reason for selling your business. Don't decide to sell because you have had a bad week or because moving closer to the grandkids sounds like a good idea. Also, don't decide to "test the waters" just to see what sort of price your business will command. Before you decide to sell your company, focus on your true objectives. The first thing a prospective buyer will want to know is the reason you are selling. The more valid the reason you offer, the more serious the buyer will be.
2. Don't wait until you have to sell, for either economic or emotional reasons. You don't want anxiety to force you into accepting a deal that's not good for you--or for the buyer. During the two months preceding the new year, sellers always say that they don't want to sell until the after the first of the year. This delay can be an unfortunate one.
3. Once you have made the decision to sell--and before talking to your business broker-- you should gather the information needed to market and subsequently sell your business. Here's a list of the key items:
• Three year's profit and loss statements
• Federal income tax returns for the business
• List of fixtures and equipment
• The lease and any lease-related documents
• Copy of the franchise agreement (if applicable)
• List of loans against the business with amounts and payment schedule
• Copies of any equipment leases
• An approximate amount of the inventory on hand
• Names of outside advisors
1. Remember that you are part of the marketing team. Your business broker can't do it all--and might even ask you to come to an office meeting to tell the rest of the staff about your business. Follow your broker's advice about dealing with prospective buyers--there's a right and a wrong time to meet them.
2. Confidentiality works both ways. The broker will constantly stress confidentiality to the customers to whom he or she shows your business. However, as the seller, you must maintain confidentiality about a pending sale in your day-to-day business activities.
3. You, as the seller, should put yourself in a prospective buyer's position. The next time you go to your place of business, pretend you are a buyer looking at it for the first time. How impressed are you?
4. Just because you are selling, now is not the time to let the business slip. It's important that prospective buyers see your business at its best: bustling, and showing no signs of neglect. Here are a few areas to focus on:
• Keep normal operating hours. There is a tendency for sellers to "let down" when they put their business up for sale.
• Repair signs, replace outside lights, and do a general spiffing-up for first impression purposes.
• Tidy the outside premises (if appropriate).
• Spruce up the interior as well.
• Repair non-operating equipment or remove it.
• Remove items that are not included in the sale.
• Maintain inventory at constant levels.
1. Engage an outside professional who understands the sales process. David Gumpert, former Harvard Business Review associate editor said, "Inexperienced lawyers are often reluctant to advise their clients to take any risks, whereas lawyers who have been through such negotiations a few times know that's reasonable." If you are going to use a lawyer, use one who is seasoned in the business sale process.
2. Be flexible! You need to keep the ball rolling once an offer has been presented. Study it closely. Just because you didn't get your asking price, the offer may have other points that will offset it, such as higher payments or interest, a consulting agreement, more cash than you anticipated or a buyer that you are comfortable with. You have probably spent years building your business--you want it to continue to be successful. The right buyer may be better than a higher price, especially if there is seller financing involved, and there usually is. If you must counter-offer, do so only on those points that are really important to you. Be willing to "horsetrade" if you must to complete the deal. There is an old adage that the first offer you get is probably the best you will ever get--and it's true.
3. Remember that most successful transactions are successful because they create a win-win situation for everyone involved.

Copyright BBP 2003

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The Advantages of Seller Financing

Business owners who want to sell their business are often told by business brokers and intermediaries that they will have to consider financing the sale themselves. Many owners would like to receive all cash, but many also understand that there is very little outside financing available from banks, or other sources. The only source left is the seller of the business.

Buyers usually feel that businesses should be able to pay for themselves. 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, "the business isn't any good and I want my cash out of it now, just in case?" They are also wary of the seller who wants the carry-back note fully collateralized by the buyer. First, the buyer has probably used most of his or her assets to assemble the down payment and additional funds necessary to go into business. Most buyers are reluctant to use what little assets they may have left to secure the seller's note. The buyer will ask, "what is the seller not telling me and/or why wouldn't the business provide sufficient collateral?"

Here are some reasons why a seller might want to consider seller financing the sale of his or her business:

• There is a greater chance that the business will sell with seller financing. In fact, in many cases, the business won't sell for cash, unless the owner is willing to lower the price substantially.
• The seller will usually receive a much higher price for the business by financing a portion of the sale price.
• Most sellers are unaware of how much the interest on the sale increases their actual selling price. For example, a seller carry-back note at 8 percent carried over nine years will actually double the amount carried. $100,000 at 8 percent over a nine year period results in the seller receiving $200,000.
• With interest rates currently the lowest in years, sellers usually get a higher rate from a buyer than they would get from any financial institution.
• Sellers may also discover that, in many cases, the tax consequences of financing the sale themselves may be more advantageous than those for an all-cash sale.
• Financing the sale tells the buyer that the seller has enough confidence that the business will, or can, pay for itself.

Certainly, the biggest concern the seller has is whether or not the new owner will be successful enough to pay off the loan the seller has agreed to provide as a condition of the sale. Here are some obvious, but important, factors that may indicate the stability of the buyer:

• How long has the buyer lived in the same house or been a home owner?
• What is the buyer's work history?
• How do the buyer's personal references check out?
• Does the buyer have a satisfactory banking relationship?

Advantages of Seller Financing for the Buyer

• Lower interest
• Longer term
• No fees
• Seller stays involved
• Less paperwork
• Easier to negotiate

Copyright BBP 2003

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The Confidentiality Myth*

When it comes time to sell the company, a seller's prime concern is one of confidentiality. Owners are afraid that if "the word gets out" they will lose employees, customers and suppliers. Not to downplay confidentiality, but these incidents seldom happen if the process is properly managed. There is always the chance that a "leak" will occur, but when handled correctly serious damage is unlikely. Nevertheless, a seller should still be very careful about maintaining confidentiality since avoiding problems is always better than dealing with them. Here are some suggestions:

• Understand that there is a "Catch 22" involved. The seller wants the highest price and the best deal and this usually means contacting numerous potential buyers. Obviously, the more prospective buyers that are contacted the greater the opportunity for a breach of confidentiality to occur. Business intermediaries understand that buyers have to be contacted and but they also realize the importance of confidentiality and have the procedures in place to reduce the risk of a breach. Another alternative is to work with just a few buyers. This, however, does reduce the chances of obtaining the best price.
• Another way to avoid this breach is to try to keep a short timetable between going to market and a closing. The shorter the timetable the less the chance for the word to get out. One way to keep a short timetable is to gather all of the information necessary for the buyer's due diligence ahead of time. Create a place where all of this material can be consolidated. This can be as simple as a set of secured file drawers. Such documentation as: customer and vendor contracts, leases and real estate records, financial statements and supporting schedules (assets, receivables, payables), conditions of employment agreements, organization charts and pay schedules, summary of benefit programs, patents, etc. should be gathered. It is not unusual for due diligence examinations to look back 3 to 5 years, so there could be a lot of records.
• The above means that the seller has to get organized. Selling one's business is fraught with paperwork. Set up some three-ring binders so all of the relevant paperwork and resulting documentation has a place. These binders should be kept in a secure location.
• The seller's employees should be conditioned to having strange people (potential buyers) walk through the facility. One way to avoid suspicion is to arrange to have unrelated people, for example - customers, suppliers, advisors - tour the company facilities prior to placing the business on the market.
• If sellers have not prepared their employees for strangers walking through the facilities as suggested above, awkward situations can develop. A valued employee may question why tours are being conducted. The seller is then placed in the position of explaining what is happening or covering the question with a "smokescreen." A seller could reply by saying that the strangers are possible investors in the company. If asked directly if the business is for sale the seller could respond by saying that if General Electric wants to pay a bundle for it - anything is for sale. Once in the selling process, it is also important to minimize traffic by only allowing serious qualified prospects to tour the operation.
• Keep in mind that confidentiality leaks can emanate from many sources. For example, an errant email ends up on someone else's email. A fax gets sent to the wrong fax machine or UPS or FedEx deliveries go to the wrong people. Establish methods ahead of time on how to communicate with potential buyers or an intermediary.
• The key to handling confidentiality may be for the seller to retain a third party intermediary. They will insist that all potential buyers sign a confidentiality agreement. They will also be able to advise the seller on how to handle the "company tours" and can insure that only qualified buyers are shown the facilities.
• The "myth" is that confidentiality issues can make or break a deal, or cause serious damage to the seller's business. The reality is that breaches seldom occur when an intermediary is involved, and if they do occur and are handled properly, there is little damage to the business or a potential transaction.

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The Selling Memorandum

A sellers memorandum includes all those points one would normally expect to see in any business plan, to wit: an executive summary, a business description, financial requirements, target market niche, identification of top management, an operations review, analysis of strengths and weaknesses, and current financial statements and projections.

Guide to Mergers and Acquisitions published by PPC

A proposed sale of a middle-market company almost always begins with a selling memorandum. This document is called many things including offering memorandum, confidential descriptive memorandum or simply the book. Regardless of what you chose to call it, its purpose is to encourage prospective buyers to take a further look at the company.

For the seller, it has a secondary side benefit. It forces them to take a hard look at the company, its strengths and its weaknesses. Upon reviewing the information necessary to prepare a selling memorandum, the seller may, in fact, decide that it's not such a bad company after all and elect to keep it. On the other hand, the seller could decide that the current condition of the company needs to be improved before attempting to sell it. Looking at the company through the eyes of a buyer, as it were, could also prompt the seller to try to increase the value prior to selling. This may be done, for example, by building a stronger brand loyalty or entering into employee contracts with key managers or perhaps by diversifying the customer base.

Assuming, however, that the decision to sell has been made, the importance of the selling memorandum can not be emphasized enough. It is like a strong advertisement for the company and must tell a good story. It should highlight the positive parts of the company, add value for the buyer, and show the negatives as opportunities. The selling memorandum has to make a good first impression. A seller wants to attract qualified buyers and bring value to the company being sold. This means that the selling memorandum has to be prepared and written by a professional. It is too important a document to do otherwise. It is also the basis of a strong marketing program to attract the best buyer at the best price.

What makes up a strong selling memorandum? It includes quite a few different elements. But, first a few caveats:

• Don't include confidential company information or reveal trade secrets. Although the document may be intended for qualified buyers only, once it is disseminated it really becomes a public document. Professional intermediaries and investment bankers do make prospective buyers sign a confidentiality agreement, which does help in this area. Still, with copy machines and email services readily available, it never hurts to maintain confidential information until much further in the negotiations.
• Make sure that a prospective buyer knows exactly what you are selling. It is assumed unless otherwise mentioned that it is the entire company that is for sale. You don't want prospects to think that they can purchase just the most profitable portions of the company. Obviously, a seller wants to show-off the excellent parts of the company, but this should not be done at the expense of the not-so-good parts. These can be presented as excellent opportunities.
• The selling memorandum should not be aimed at the right prospects. If the business requires technical language to best explain it, use it. A buyer, who doesn't understand it, probably isn't a buyer.
• There should be an explanation of how the company works so a prospective acquirer can read through the lines about the selling company's corporate culture. This element can make or break a sale and it's best to discover it at the outset.
• There is always a tendency to include too much information - don't. Don't over-sell. You don't need to include the names of customers and vendors and the names of all the employees.
• Be sure to also include the blemishes. If there is a pending lawsuit, include. The bad news should be revealed early on - no one likes surprises, especially later in the negotiations.
• And, finally, and probably, most important, the selling memorandum should be easy to read.

Now, what about the various elements of the selling memorandum. Here are the areas that should be covered in it.

Business Profile (or Executive Summary) - This may be the most important element of the selling memorandum. The entire offering should be covered in brief - no more than four-pages - at most. Many are done in one-page. Remember the sole purpose of the business profile is to generate excitement and interest. It is a selling piece! It should include:

• Ownership
• The Business
• Financial highlights
• Products and/or services
• Markets
• The opportunities
• Reason for sale (Why is it for sale)

This business profile is usually sent to possible purchasers. If the prospect is interested further, they sign a confidentiality agreement before receiving the entire selling memorandum. The selling memorandum includes detailed information on the key elements of the company and usually covers the following:

• Business overview - In other words, who and what is the company? This is the place where everything about the company is summarized: it's history, the employees (in general), the management team, the locations, any important intangible assets, and the outlook for the business.
• Company strengths - What does the company do well? This should cover those strengths that bring value to this particular company.
• Markets - Who are the customers/clients? What and how does the company sell its products or market its services.
• The Risks - What are they? If there are risks in the business, they should be described and then an explanation of how the company solves them.
• Financial data - Is the company making money? Cash flow statements are important. Current thinking is that the seller doesn't have to include all of the available financial data - which the prospective buyer will go through all the financial history as the deal moves forward.

The selling memorandum should include any relevant corporate and/or product brochures, as attachments. Prior to putting the business on the market, it is important that an outside valuation be performed. However, the price and terms are not usually a part of the selling memorandum - the marketplace will dictate the price. The purpose of the entire selling memorandum is to generate sufficient interest that a prospective acquirer will make an offer.

Building Value

Prior to putting a company on the market for sale, the question of value has to be addressed. Increasing the value should, in fact, be considered a year, preferably two, prior to sale. Value is based on profitability, cash flow, management and the overall quality of the operation itself. Here are some considerations in building value, whether the business is going tot be sold or not.

• Are the company's pricing policies set too low creating low margins. Perhaps they were set some time ago in order to boost sales. Now might be a good time to review them to make sure they are in keeping with current market conditions.
• Is the inventory level too high? How about work-in-progress or finished goods? Increasing the turns in inventory can increase cash flow.
• Are you paying too much for raw material? Talk to your vendors and suppliers, you might be able to get some better prices or terms. Take a look at all of the expenses: utilities telephone, technology, office expense - it all adds up.
• Are there services that could be outsourced for increased savings?
• Increasing the quality of customer service may entice customers or clients to pay their bill promptly.
• Are all the employees working together to improve the operation and profitability of the company?

These are just a few of the areas that can and should be reviewed. Although profits are important, there is an old expression that cash is king. The time to take a look at the overall company operations is now.

Measuring the Value of a Company

Consider the following important areas of a company. How does your company stack up in these critical areas? If you were to rank them on a 1 to 4 scale, for instance, what would your score be? The higher the score the more valuable the company! They are considered value drivers - in other words, they are important to a prospective buyer.

• Profitability
• Type of business
• History of company and industry
• Business growth
• Customers/Clients
• Market share
• Return on investment
• Quality of financial statements
• Size
• Management
• Terms of sale

For example, in looking at a company's financial data - are the statements audited or merely compiled? Is the growth of the company slow or is it growing quickly? How about the customer base - is it based on several major ones, or is it spread out over many customers? The time to consider these critical value drivers is now!

Copyright BBP 2003

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The Time To Sell Might Be Right Now

The first question one might ask, given the relatively healthy financial climate, is WHY? Selling when times are good? The answer, for many sellers, can be a resounding YES! Here are some of the reasons why, followed by tips for getting the process started.

The Buyers Are Out There

Executives and middle managers out of work--and determined not to be "downsized" by big business again--are eyeing the advantages of being in business for themselves. For some time now, the percentage has steadily grown of those corporate executives who leave jobs in order to become independent business owners. It isn't just the money they are dreaming of--it's the desire for more control over their lives.

How to find these buyers? The business broker is the professional to whom sellers turn when looking for serious, "qualified" buyers. The business broker not only helps match the right buyer with the right business, but also educates the buyer in the buy-sell process, alleviating concerns and keeping the transaction in steady forward motion. With plenty of buyers to choose from in today's market, it's more important than ever to identify the time-wasters and those who think they want to buy but really aren't ready to take the big step.

It's Better To "Cash-Out" Than To "Burnout."

Burnout can come with a business that's successful as well as one that's failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout?

That isolated feeling.

The burnt-out owner has been "chief cook and bottle washer" for such an extended period of time that even routine acts of decision-making and action-taking seem like Sisyphean tasks. These owners have been shouldering the burdens alone too long.

Fuzzy perspective.

Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily challenge, and problem-solving sometimes goes no further than the application of business bandaids that cost money in the long run rather than increase profits.

No more fun.

Of course owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread--or boredom--should consider moving on to a fresh challenge elsewhere.

Just plain tired.

Simply put, many business owners burn out from the demands placed on them to keep their companies operating day after day, year after year. The schedule is not for everyone; in fact, statistics show that it's hardly for anyone, long-term.

The important point here is for business owners to recognize the signs and take action before burnout begins to hinder the growth--or sheer survival--of the business. Many of today's independent business owners feel they've worked hard, made their money and sense that now is a good time to "cash-out" and move on.

The Best Price Comes from Selling While "Up."

Other than burnout and its consequences, there are other factors that can lead to the "forced sale" of a business. Compelling personal problems (a divorce or death in the family, poor health), shortage of capital or outright failure of the business, the lack of heirs to take over--these are the traditional examples. Instead of waiting for unfavorable conditions, potential sellers should keep a wary eye out for that all-important right time for putting their business on the market. When might that time be?

The Small Business Administration (SBA), in researching selling trends, reports that three to five years is a long enough stretch for many of today's business owners. One in every three plans to sell; many of them right from the outset. The business they've bought is not a legacy for their children--it's a shorter-term investment of their time as well as their money. The ability to present a healthy operation, with an owner in the position to "role model" its success are major advantages in the completion of a successful business sale. One of the surest ways to maximize the value of a business is not waiting too long to sell.

Copyright BBP 2003

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What Do Buyers Really Want To Know

Before answering the question, it makes sense to first ask why people want to be in business for themselves. What are their motives? There have been many surveys addressing this question. The words may be different, but the idea behind them and the order in which they are listed are almost always the same.

1. Want to do their own thing; to control their own destiny, so to speak.
2. Do not want to work for anyone else.
3. Want to make better use of their skills and abilities.
4. Want to make money.

These surveys indicate that by far the biggest reason people want to be in business for themselves is to be their own boss. The first three reasons listed revolve around this theme. Some may be frustrated in their current job or position. Others may not like their current boss or employer, while still others feel that their abilities are not being used properly or sufficiently.

The important item to note is that money is reason number four. Although making money is certainly important and necessary, it is not the primary issue. Once a person decides to go into business for himself or herself, he or she has to explore the options. Starting a business is certainly one option, but is fraught with risk. Buying an existing business is the method most people prefer. Purchasing a known entity reduces the risks substantially.

There are some key questions buyers want, or should want, answers to, once the decision to purchase an existing business has been made. Below are the primary ones; although a prospective buyer may not want answers to all of them, the seller should be prepared to respond to each one.

• How much is the down payment? - Most buyers are limited in the amount of cash they have for a down payment on a business. After all, if cash were not an issue, they probably wouldn't be looking to purchase a business in the first place.
• Will the seller finance the sale of the business? - It can be difficult to finance the sale of a business; therefore, if the seller isn't willing, he or she must find a buyer who is prepared to pay all cash. This is very difficult to do.
• Why is the seller selling? - This is a very important question. Buyers want assurance that the reason is legitimate and not because of the business itself.
• Will the owner stay and train or work with a new owner? - Many people buy a franchise because of the assistance offered. A seller who is willing, at no cost, to stay and to help with the transition is a big plus.
• How much income can a new owner expect? - This may not be the main criterion, but it is obviously an important issue. A new owner has to be able to pay the bills - both business-wise and personally. And just as important as the income is the seller's ability to substantiate it with financial statements or tax returns.
• What makes the business different, unique or special? - Most buyers want to take pride in the business they purchase.
• How can the business grow? - New owners are full of enthusiasm and want to increase the business. Some buyers are willing to buy a business that is currently only marginal if they feel there is a real opportunity for growth.
• What doesn't the buyer know? - Buyers, and sellers too, don't like surprises. They want to know the good - and the bad - out front. Buyers understand that there is no such thing as a perfect business.

Years ago, it could be said that prospective buyers of businesses had only four questions:

1. Where is the business?
2. How much is it?
3. How much can I make?
4. Why is it for sale?

In addition to asking basic questions today's buyer wants to know much more before investing in his or her own business. Sellers have to able to answer not only the four basic questions, but also be able to address the wider range of questions outlined above.

Despite all of the questions and answers, what most buyers really want is an opportunity to achieve the Great American Dream - owning one's own business!

Copyright BBP 2003

What Do Buyers Want To Know?

• What is the required capital investment?
• What is the annual net increase in sales?
• What is in inventory?
• What is the debt?
• What is the prospect of the owner staying on?
• What makes this company different/special/unique?
• What further defines the product or service? Bid work? Repeat business?
• What can be done to grow the business?
• What can the buyer do to add value?
• What is the profit picture in bad times as well as good?

Copyright BBP 2003

What Every Seller Should Know

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 you can get. 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. Following are some of the most common questions asked by sellers -- and if you are contemplating selling your business, these are questions you should be asking, too.

1. What Can -- and Can't -- A Business Broker Do for Me?

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

A business broker is not, however, a magician who can sell an overpriced business. Most businesses are salable 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 the success of the sale itself.

2. Why Is Seller Financing Important To the Sale Of My Business?

Surveys have shown that sellers who ask for cash receive, on average, only 75 percent of their asking price, while sellers who accept terms typically receive 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 selling increase dramatically, and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can generate by financing the sale of their business. What's more, seller financing tells the buyer that the seller is confident about the ability of the business to -- literally -- pay for itself.

3. How Long Will It Take To Sell My Business?

It generally takes, on average, between three to four months to sell a business. (Keep in mind, however, that an average is just that.) The sooner the business broker has all the information needed to begin the marketing process, the shorter the time period for selling 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, not understanding that 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 for 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 -- as in the case of seller financing -- sends a message to a potential buyer about the seller's confidence in the health of the business.

4. What Happens When There Is A Buyer For My Business?

When a buyer is sufficiently interested in your business, business brokers will help in the preparation of an offer or proposal, which may have one or more contingencies. Usually, contingencies call for 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 can withdraw it at any time.

Business brokers will submit all offers to you for your consideration. At first review, you may not be pleased with a particular offer: it may be lacking in some areas, but it might also have some pluses to seriously consider. Remember the old adage: "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 with thought and care.

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; otherwise, the buyer might think you have something to hide. 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 the possession of the business. Your business broker professional will work with you throughout the entire sales process.

5. Co-Branding: The New Age Business Combo

The store-within-a-store is not a novel concept. The tailor next to the dry cleaner, for example, is a combination that's been around since the beginning of business time.

Now combining business forces has a new look -- and a new name. It's called co-branding, and the idea is going like hotcakes. Like hotcakes with a side of motor oil. Among franchises, where the concept is most popular, co-branding means selling combined products and/or services at the same place of business. The combinations may sometimes seem unlikely, but any way you slice it, co-branding seems to work:

6. Co-Branding for One-Stop Convenience

This type of co-branding can produce some stomach-churning combos. Fast food and fuel, currently the most popular oddball mix, proves it can be convenience alone that makes the idea work.

For example, it's lunchtime and you also need gas. Why settle for Nabs and a Coke from the service station machine? Why go to McDonald's for your fast-food feast and then hit the road again for gas? Instead, while munching on your double-decker Italian at a Subway, your car is being gassed and car windows are being washed. One stop -- and two items are off your list.

When the combined franchises are both nationally-recognized big names, each one benefits from the business attracted by the other. And in cases where one member of the combo is better-known, the bigger name draws traffic to the other. There are also real financial advantages when two or more businesses co-brand. They will shoulder equally expenses such as rent, telephone lines, and most utilities.

7. Co-Branding for Synergy

Adding synergy to convenience makes a hard-to-beat selling technique. Business accounting services with a next-door-copy center, an office-supply store with a packing/shipping outfit, the bookshop that houses a coffee bar -- when different franchises are placed within one location, each can concentrate on its own special products or services. From the franchisor's point of view, co-branding increases efficiency and customer satisfaction.

These two-for-one operations bank on the attraction of allied products or services. The key here is to predict customer need -- and in the case of the bookshop coffee bar -- mood. Having fulfilled his/her original shopping purpose, what might the customer be drawn to next? This leads us to the next type of co-branding ...

8. Co-Branding for Impulse Purchase

The best example here is the national fast-food vendor, Arby's. This company also owns T.J. Cinnamons (breads and muffins). How better to introduce a new food concepts than to put them side-by-side with good old established roast beef? After lunch, go ahead and get your breakfast buns as long as they're right there.

From the point of view of the companies involved, this doubling-up (or even tripling up) means more than just increased sales. It makes good business sense all the way around. The space isn't all that's shared -- a wise financial move in itself -- but also payroll expenses and, in some cases, the workers themselves. After the breakfast rush, the crew can go next door and help set up for lunch. If one business melds better with the summer season and another with winter, employees can be concentrated to follow customer traffic.

So what's not to like about co-branding? So far, so good. For franchisors everywhere, it looks like a win-win combination.

Copyright BBP 2003

What Makes the Sale of a Business Fall Through

There are myriad reasons why the sale of a business doesn't close successfully; these multiple causes can, however, be broken down into four categories: those caused by the seller, those caused by the buyer, those that just happen ("acts of fate"), and those caused by third parties. The following examines the part each of these components can play in contributing to the wrecked deal:

The Seller

1. In some instances, the seller doesn't have a valid reason for entering into the sale process. Without a strong reason for selling, he or she has neither the willingness to negotiate nor the flexibility to see the sale to a conclusion. Without such a commitment, the desire to sell is not powerful enough to overcome the many complexities necessary to finalize the sales process.
2. Some sellers are merely testing the waters. As detailed above, they are not at that "hungry" stage that provides the push toward a successful transaction. These sellers merely want to see if anyone wants to buy their business at the price they would like to receive.
3. Many sellers are unrealistic about the price they want for their business. They may be sincere about wanting to sell, but they are unable to be realistic about how the marketplace will value the business. The demand for their business may not be there.
4. Some sellers fail to be honest about their business or its situation. They may be hiding the fact that new competition is entering the market, that the business has serious problems or some other reason the business is not salable under existing circumstances. Even worse, some sellers do not disclose that there is more than one owner and that they are not all in agreement about selling the business.
5. A seller may decide to wait until a buyer is found and then check with their outside advisors about the tax and/or legal consequences. At this point, the terms of the deal have to be altered, and the buyer won't agree. Sellers should deal with these complications ahead of time. Nobody likes changes--especially buyers!
6. Sometimes sellers don't understand that almost all businesses are seller-financed. Buyers have to be able to make the payments while still making a living from the business. If the business cannot offer this necessity, no one will buy it.

The Buyer

1. The buyer may not have an urgent need or a strong desire to go into business. In many cases the buyer may begin with positive intentions, but then doesn't have the courage to make "the leap of faith" necessary to go through with the sale.
2. Some buyers, like sellers, have very unrealistic expectations regarding the price of businesses. They are also uneducated about the nature of small business in general.
3. Many buyers are not willing to put in the hours or do the type of work necessary to operate a business successfully.
4. Buyers can be influenced by others who are opposed to the purchase of a business. Many people don't or can't understand the need to be "your own boss."

Acts of Fate

These are the situations that "just happen," causing deals to fall through. Even considering the strong hand of fate, many of these situations could have been prevented.

1. A buyer's investigation reveals some unmentioned or unknown problem, such as an environmental situation. Or, perhaps there are financial deficiencies discovered by the buyer. Unfortunately, these should have been on the table from the beginning of the selling process.
2. The seller may not be able to substantiate, at least to the buyer's satisfaction, the earnings of the business.
3. Problems may arise, unknown to both the seller and the buyer, with federal, state, or local governmental agencies.

Third Parties

1. Landlords may become difficult about transferring the lease or granting a new one.
2. Buyers and/or sellers may receive overly-aggressive advice from outside advisors, usually attorneys. Attorneys, in their zeal to represent their clients, forget that the goal is to put the deal together. In some cases, they erect so many roadblocks that the deal can only fall apart.

Most of the problems outlined here could have been resolved before the selling process was too far advanced. There are also some problems that could not have been avoided--people do sometimes enter situations with the best of intentions only to find out that this is not the right answer for them after all. These are the exceptions, however. Most business sales can have happy endings if potential difficulties are handled at the appropriate time.

Business brokers are aware of the various ways a deal may fall through. They are experienced in resolving issues before the business goes onto the market or before a buyer is introduced to the business. To buy or sell a business successfully, sellers should resolve any potential deal-wreckers, following the advice of a professional business broker.

Although business brokers cannot provide legal advice, they are familiar with the intricacies of the business sale. They are also familiar with local attorneys who specialize in the details of these transactions. These attorneys will usually be more efficient, and therefore more cost-effective, than the attorney who handles a general practice.

Copyright BBP 2003

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When Selling Your Business, Play To Win

If you are an independent business owner, you are most likely also an independent business seller--if not now, you will be somewhere down the road. The Small Business Administration reports that three to five years is a long enough stretch for many business owners and that one in every three plans to sell, many of them right from the outset. With fewer cases of a business being passed on to future generations, selling has become a fact of independent business life. No matter at what stage your own business life may be, prepare now to stay ahead in the selling game.

Perhaps one of the most important rules of the selling game is learning how not to "sell." An apt anecdote from Cary Reich's The Life of Nelson Rockefeller shows a pro at work doing (or not doing) just that:

When the indomitable J.P. Morgan was seeking the Rockefeller's Mesabi iron ore properties to complete his assemblage of what was to become U.S. Steel, it was Junior [John D. Rockefeller, Jr.] who went head-to-head with the financier. "Well, what's your price?" Morgan demanded, to which Junior coolly replied, "I think there must be some mistake. I did not come here to sell. I understand you wished to buy." Morgan ended up with the properties, but at a steep cost.

As this anecdote shows, the best approach to succeeding at the selling game is to be less of a "seller" and more of a "player." Take a look at these tips for keeping the score in your favor:

Let Others Do the Heavy Pitching

Selling a business is an intense emotional drain; at best, a distraction. Let professional advisors do the yeoman's duty when selling a business. A business intermediary represents the seller and is experienced in completing the transaction in a timely manner and at a price and terms acceptable to the seller. Your business broker will also present and assess offers, and help in structuring the transaction itself. If you plan to use an attorney, engage one who is seasoned in the business selling process. A former Harvard Business Review associate editor once said, "Inexperienced lawyers are often reluctant to advise their clients to take any risks, whereas lawyers who have been through such negotiations a few times know what's reasonable."

Stay in the Game

With the right advisors on your side, you can do the all-important work of tending to the daily life of the business. There is a tendency for sellers to let things slip once the business is officially for sale. Keeping normal operating hours, maintaining inventory at constant levels, and attention to the appearance and general good repair of the premises are ways to make the right impression on prospective buyers. Most important of all, tending to the daily running of the business will help ward off deterioration of sales and earnings.

Keep Pricing and Evaluation in the Ballpark

Like all sellers, you will want the best possible price for your business. You have probably spent years building it and have dreamed about its worth, based on your "sweat equity." You'll need to keep in mind that the marketplace will determine the value of the business. Ignoring that standard by asking too high a price will drive prospective buyers away, or will at the least slow the process, and perhaps to a standstill.

Play Fair with Confidentiality

Your business broker will constantly stress confidentiality to the prospects to whom he or she shows your business. They will use nonspecific descriptions of the business, require signatures on strict confidentiality agreements, screen all prospects, and sometimes phase the release of information to match the growing evidence of buyer sincerity. As the seller you must also maintain confidentiality in your day-to-day business activities, never forgetting that a breach of confidentiality can wreck the deal.

Sell Before Striking Out

Don't wait until you are forced to sell for any reason, whether financial or personal. Instead of selling impulsively, you should plan ahead carefully by cleaning up the balance sheet, settling any litigation, providing a list of loans against the business with amounts and payment schedule, tackling any environmental problems, and by gathering in one place all pertinent paperwork, such as franchise agreement (if applicable), the lease and any lease-related documents, and an approximation of inventory on-hand. In addition, you could increase the value of your business by up to 20 percent by providing audited financial statements for one or two years in advance of selling.

Think Twice Before Retiring Your "Number"

The trend is for sellers to assume they will retire after selling the business. But consider this: agreeing to stay on in some capacity can actually help you get a better price for your business. Many buyers will pay more to have the seller stay aboard, thus helping to reduce their risk.

Keep the Ball Rolling

You need to keep the negotiation ball rolling once an offer has been presented. Even if you don't get your asking price, the offer may have other points that will offset that disappointment, such as higher payments or interest, a consulting agreement, more cash than you anticipated, or a buyer who seems "just right." The right buyer may be better than a higher price, especially if there is seller financing involved, and there usually is. In many cases, the structure of the deal is more important than the price. And when the ball is rolling, allow it to pick up speed. Deals that drag are too often deals that fail to close.

By following these tips, and by working closely with your business broker, you can have confidence in being a seller who, like John D. Rockefeller, Jr., doesn't "come here to sell." You will play the selling game--and be a winner.

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When Selling Your Business: Confidentiality Is Key

You've make the big decision to sell. Your books are in order, you've spiffed up the premises. What are you waiting for?

Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker?

Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following:

1. Qualify the buyer.

Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters.

2. Use appropriate marketing strategies.

How can you advertise a business for sale without spreading the news too far? The business broker, as intermediary, is in an ideal position to do just that. Brokers place advertising and post listings that contain non-specific descriptions of the business. This "blind ad" approach can be phrased to attract interest in the business without revealing its name or exact location.

3. Prepare paperwork designed to promote confidentiality.

After screening prospective buyers and assessing the degree of interest and financial qualification, the business broker will also require prospects to sign a strictly-worded confidentiality agreement.

4. Manage appropriate release of information.

Until a purchase-and-sale agreement has been signed, the business broker can phase the release of information about the business to match the growing evidence of buyer sincerity and trustworthiness.

However, even with the most careful handling, rumors are unavoidable. The wise seller will expect questions from the curious and will be ready with answers. If you find yourself needing to muffle the business-for-sale buzz, aim for a mix of good sense and good humor. You might respond that many buyers have approached you over the years, making "news" before it happens. You could go on to say that you never refuse to listen to a great offer, adding that you are, in fact, all ears right at that moment!

No matter how close-mouthed sellers choose to be with the community at large, they might consider being open with their own employees. This is the group most likely to sense what's happening, and sharing the news with workers can sometimes be a positive move. Since it's often the unknown that causes the most anxiety, including employees in the decision to sell can actually calm over-active imaginations. Once enlightened, workers can be made to understand the need for discretion. Confidentiality will help protect their own future as well as that of the business.

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Who Is The Buyer?

Buyers buy a business for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. If the buyer is not serious the sale will never close. Here are just a few of the reasons that buyers buy businesses:

• Laid-off, fired, being transferred (or about to be any of them)
• Early retirement (forced or not)
• Job dissatisfaction
• Desire for more control over their lives
• Desire to do his or her own thing

A Buyer Profile

Here is a look at the make-up of the average individual buyer looking to replace a lost job or wanting to get out of an uncomfortable job situation. The chances are he is a male (however, more and more women are going into business for themselves so this is rapidly changing). Almost 50 percent will have less than $100,000 in which to invest in the purchase of a business. In many cases the funds, or part of them, will come from personal savings followed by financial assistance from family members. The buyer will never have owned a business before, and most likely will buy a business he or she had never considered until being introduced to it.

Their primary reason for going into business is to get out of their present situation, be it unemployment, job disagreement (or discouragement). The prospective buyer wants to do their own thing, be in charge of their own destiny, and they don't want to work for anyone. Money is important but it's not at the top of the list, in fact, it probably is in fourth or fifth place in the overall list. In order to pursue the dream of owning one's own business, the buyer must be able to make that "leap of faith" necessary to take the risk of purchasing and operating their own business.

Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses. Keep in mind the following traits of a willing buyer:

• The desire to buy a business
• The need and urgency to buy a business
• The financial resources
• The ability to make his or her own decisions
• Reasonable expectations of what business ownership can do for him or her

What Do Buyers Want to Know?

This may be a bit premature since you may not have decided to sell, but it may help in your decision making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked - and, should be prepared to answer:

• How much money is required to buy the business?
• What is the annual increase in sales?
• How much is the inventory?
• What is the debt?
• Will the seller train and stay on for awhile?
• What makes the business different/special/unique?
• What further defines the product or service? Bid work? Repeat business?
• What can be done to grow the business?
• What can the buyer do to add value?
• What is the profit picture in bad times as well as good?

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Why Sales of Businesses Fall Apart

There are three main players involved in the sale of a business, plus one other factor - that could be termed "the hand of fate." The players directly involved are: the sellers, the buyers and the third parties. Each one of these has an important role in the successful closing of the sale of a privately held business. Conversely, each one can directly contribute to the deal not closing at all. Although in many cases there can be a combination of two or more, usually one side is the main contributor, or, at least, starts the ball rolling uphill. Here are the primary reasons why deals end up not closing and then how the "fickle hand of fate" can also have a negative impact on the deal.

Sellers

• Many times, sellers are not really committed to selling the business. Although it may have sounded like a good idea at the time, or they may suddenly realize that they won't have a thing to do if it sells, or they discover that the marketplace will not pay them what they think their business is worth. A seller who is committed to selling will be willing to overcome the complexities necessary for closing the sale.
• In some cases, a seller may not reveal a problem, or may not think it is not important enough to reveal. Buyers, like most people, do not like surprises. Sellers must understand that only by openly discussing all issues about the business can a sale close successfully.
• Sellers should consult their outside advisors prior to putting their business on the market.
• Sellers must understand that their business is only worth what someone is willing to pay for it. Also, a seller who is willing to offer reasonable terms to a buyer almost always will receive a higher price than the seller.

Buyers

• Like their counterparts - the sellers - buyers must also be motivated to act. Without the need or desire to own their own business, the sale will not close. This need and desire must be coupled with the courage to "make the leap of faith" necessary to be a business owner. There are no guarantees.
• Buyers must have realistic expectations of just what their money will buy - so to speak. A buyer who has $50,000 to invest in a business can't expect to buy a business to that has $250,000 in profits. He or she may be able to increase the business to this level, but one can't expect to buy it with a minimum down payment. A rough rule of thumb is that a buyer can hope to buy a business with a bottom line equivalent to the amount of down payment available.
• Buyers must be willing to work hard and understand they are usually the proverbial "chief cook and bottle washers." Long hours and long days are generally necessary to succeed in operating one's own business. However, there is nothing like being one's own boss.
• Buyers should listen to their advisors, but understand that only they can make the decisions.

Third Parties

• Advisors may be overly aggressive and try to make decisions for both buyers and sellers. Assuming that the buyer and seller are in agreement, the role of the advisor or professional is to make the deal happen unless it is illegal to do so. Outside advisors may, with all good intentions, throw up so many roadblocks that the deal goes sour.
• Landlords can also be stumbling blocks. They are usually the only party to a business sale that gains nothing from it. The lessor is asked to draw a new lease or assign an existing one. It is best if the landlord or his or her representatives are consulted prior to the business going on the market. This way there are no surprises once a qualified buyer is found.

Acts of Fate

Situations can develop that are the fault of no one, but the "fickle hand of fate" can occur causing a sale to fall apart. Here are a just a few instances:

• The proverbial "truck" hits the buyer. This has happened, as has the fire that destroys the business a day before the sale is to close. Such acts are rare, but these acts of fate do happen.
• An unsuspected environmental issue may arise that - best case - merely postpones the closing, but - worst case - wreaks the deal.
• The buyer or seller may have misrepresented something along the way that comes back to force the sale not to close. This may have been unintentional, but the damage is done. It is important that everyone is open about every phase of the transaction.

Business brokers have seen almost everything that can cause the sale of a business to fall apart. They are aware of the problems that can cause a sale not to close and can usually resolve them before they can impact the sale. Business brokers have been through the selling process and have worked with outside advisors and professionals. They are familiar with all of the intricacies of the business transaction. Most business sales can have happy endings if any potential problems or difficulties are handled and resolved at the appropriate time.

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Why Sell Your Company

Selling one's business can be a traumatic and emotional event. In fact, "seller's remorse" is one of the major reasons that deals don't close. The business may have been in the family for generations. The owner may have built it from scratch or bought it and made it very successful. However, there are times when selling is the best course to take. Here are a few of them.

• Burnout - This is a major reason, according to industry experts, why owners consider selling their business. The long hours and 7-day workweeks can take their toll. In other cases, the business may just become boring - the challenge gone. Losing interest in one's business usually indicates that it is time to sell.
• No one to take over - Sons and daughters can be disenchanted with the family business by the time it's their turn to take over. Family members often wish to move on to their own lives and careers.
• Personal problems - Events such as illness, divorce, and partnership issues do occur and many times force the sale of a company. Unfortunately, one cannot predict such events, and too many times, a forced sale does not bring maximum value. Proper planning and documentation can preclude an emergency sale.
• Cashing-out - Many company owners have much of their personal net worth invested in their business. This can present a lack of liquidity. Other than borrowing against the assets of the business, an owner's only option is to sell it. They have spent years building, and now it's time to cash-in.
• Outside pressure - Successful businesses create competition. It may be building to the point where it is easier to join it, than to fight it. A business may be standing still, while larger companies are moving in.
• An offer from "out of the blue" - The business may not even be on the market, but someone or some other company may see an opportunity. An owner answers the telephone and the voice on the other end says, "We would like to buy your company."

There are obviously many other reasons why businesses are sold. The paramount issue is that they should not be placed on the market if the owner or principals are not convinced it's time. And consider an old saw that says, "The time to prepare to sell is the day you start or take over the business."

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Why Seller Financing?

Many business owners would like to receive all-cash for their business when selling. And yet they are often told that this is really not possible. Why? Most people are accustomed to financing just about everything - home, car, vacation home, even college for their children. The first question business brokers are often asked is, How much money will I have to invest to buy that business?

Seller financing is usually necessary because of the lack of outside financing available. Certainly, some is available, but less than 90 percent of small business sales receive outside financing when selling. If you are selling you may be one of the few lucky ones, but the business better be absolutely perfect.

If a seller is not willing to finance the sale, many buyers suspect a problem. After all, a business should be able to pay for itself and provide a reasonable income for a buyer. A buyer then wants to know what is wrong with the business that the seller wants all cash?

Aside from this, even if a buyer has all of the necessary funds, he or she may want to spend their money on improving the business, adding equipment, building inventory, or just keep it for working capital.

Another similar issue that is raised by sellers is that, if they are willing to finance the sale, they want some outside collateral to secure the loan on their business. They want to make sure that they get all of their money - with no risk. Buyers are very sensitive about this issue. Again, they raise the point about the business being able to pay for itself. They may feel that the seller wants additional security because of concerns about the business's ability to generate a reasonable profit. This is not a reassuring signal to the buyer. Most buyers are already using most of their capital for the down payment, and they generally are very reluctant about using their home or retirement funds for additional collateral.

The services of a business broker professional can usually provide guidance in the overall financing process. And financing is often the key to the successful selling of a business

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Why Your Business Won't Sell!

What are the odds of your business actually selling once you have made the decision to sell? Well, if the annual sales of your business are $750,000 or less, research indicates that the odds of your business selling are only 18 percent. If your annual sales are $750,000 to $2 million, your odds increase to 25 percent. If your annual sales volume is above $2 million, the odds increase to 30 + percent. Keep in mind that approximately 75 percent of all businesses have annual sales of less than $750,000.

What does this all mean? To put it bluntly: if you are thinking of selling your business, you have about a one in five chance of it actually selling. This obviously begs the question: why are the odds so poor? One would think that if you put your business on the market, it should sell in a reasonable length of time. Here are some reasons why some businesses didn't sell-as explained by various business brokers and intermediaries. They are excerpted from an article in INC magazine, April 2002.

• The business is no longer listed for sale. The cash flow was strong, but a lot of buyers thought that the deal was overpriced.
• Buyers were intrigued, but the economics of the deal wouldn't make sense, and the seller wouldn't negotiate.
• There was serious interest, but the owner got distracted by an arrangement with a friend to solicit offers. None came through.
• We almost had a deal, but financing was impossible to find.
• We had three offers, including an accepted bid for $4 million, but the buyer couldn't get financing.
• The deal dragged on for months but fell apart for lack of financing. . .

They say that timing is everything. Many business owners wait until the economy is down. Their own business is also paying the price for the slowdown, so they elect to sell. Now they discover that the price they thought they could get for their business is not realistic in today's market. Sellers should keep in mind that the best time to sell is when their business is doing well.

One factor that emerges from the comments by intermediaries above is the lack of financing. This would seem to indicate that the sellers wanted all cash, or, at least, a good portion of the selling price in cash. Three of the comments stated that the reason the deal didn't go through was that "financing was impossible to find," "the buyer couldn't get financing," and ".fell apart for lack of financing." The reasons that obtaining financing is so difficult are (1) the business doesn't qualify for financing, (2) the buyer doesn't qualify for financing, and, most importantly, most small businesses are not financeable. Banks are generally not interested; the Small Business Administration (SBA), although certainly an option, only comes through in less than 10 percent of deals. If lenders are not interested in financing the sale of the business, there are only two choices: the buyer pays all cash or the seller finances the sale.

Tips for a fast sale

• Have up-to-date financial information available
• Prepare a current list of fixtures & equipment
• Maintain normal business hours
• Spiff up the business
• Set a realistic price
• Be willing to negotiate
• Gather all of the information a buyer might like to review

Here are two major ways to increase the odds that your business will be the one in five that sells:

• Make sure that you are serious before you put your business up for sale. You should be willing to accept, within reason, what the marketplace is willing to pay. It's not what you want for your business, or what your accountant says it's worth - it's what a buyer is willing to pay. Find out if the price you are asking is in the "ballpark" before you go to market. Your local business brokerage professional is a good place to start. He or she can tell you what similar businesses have sold for and what you might expect to receive if you sell now.
• Be willing to finance the sale of your business. Counting on the businesses selling for all cash or assuming that the business can be financed will most likely make your business one of the four that don't sell. By showing your willingness to assist in the financing, you reassure the buyer that you have confidence in the businesses' ability to finance itself. Also, keep in mind that by financing the business you will be entitled to interest on the balance, thereby increasing the price you will receive.

Following these guidelines and tips might not sell your business, but it will certainly increase the odds. Almost any business will sell under the right circumstances. If you are serious about selling, the first step would be to call a professional business broker. He or she can answer all of your questions about the selling process and what it takes to sell your business in today's economic climate.

The Perfect Business

The perfect business, the one that would be sure to sell, has the following attributes:

• a reasonable price
• a reasonable down payment (hopefully 40 percent of the full price or less)
• seller financing
• reasonable sales (hopefully increasing each year)
• seller earnings of $60,000 or more
• a compelling reason for sale
• a desired or popular industry type
• attractive and strategic location (if important for business type)

There is an old saying that goes something like this: "The worst day of working for yourself is better than the best day of working for someone else."

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You Can Help!

We look forward to working with you in finding a suitable buyer for your business. You, as the seller, are an integral part of the total marketing program. We would like to offer a few friendly recommendations that will help in our marketing efforts. We have checked those items that we think will be especially applicable to your type of business.

It might also be helpful if you took a good look at your business from the perspective of a buyer. Try to put yourself in the place of a prospective purchaser of the business. What would you do to make it more attractive or more saleable? Obviously, the financial records of your business are critical to the sale of your business, but how it looks is also important. First impressions really count! If a potential buyer doesn't like the appearance of your business, the rest of it may never get a chance. If you have any questions, please don't hesitate to call us. It's only by working together that we'll get the best results.

You might want to check the following to see if any of them are applicable:

• Keep normal operating hours. There may be a tendency to "let down" when you put your business up for sale. However, it's important that prospective buyers see your business at its best.
• Repair signs, replace outside lights, etc. You don't want your business to look as if it has been neglected.
• Maintain inventory at a constant level. If you let your inventory slide, your business will look neglected. If anything, increase it so your business will look busy.
• Remove items that are not included in the sale or unnecessary items, especially if inoperative.
• Repair non-operating equipment or remove it if you are not using it.
• Tidy-up outside premises.
• Spruce-up the inside of the business.

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