Selling a Business
We understand that selling a business is a major decision! For most business owners, it represents their life's work, and their largest single investment. You have probably devoted a significant amount of time, money, and resources in building, running, and operating your business. You may now have decided it is the right time to sell, and you need the best professional assistance you can get. This is when working with the professionals at Avail Brokers can make the difference between just getting rid of the business, and selling it for the very best price and terms possible!
Following are some common questions that sellers ask when considering the sale of their business. Please contact us if you would like to discuss the possibility of selling your business now, or in the future.
► What is my business worth?
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. 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. This is often the most difficult hurdle for sellers.
► How long would it take to sell my business?
From start to finish, it generally takes, on average, between five to eight months to sell most businesses. 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 listing and 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 will overprice their business thinking that they can always come down in price. This approach often "backfires," because buyers often will refuse to even look at an overpriced business to begin with. 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' ability to make the payments.
► 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 Arizona. 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 or review the documents, or attend the closing. Time is of importance in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal.
► Why is seller financing important to the sale of my business?
Surveys have shown that a seller, who asks for all cash, receives on average only seventy percent (70%) of their asking price, while sellers who accept terms receive on average eighty-six percent (86%) 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 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 in a timely manner. 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 a business broker do, and what can't they do?
The professionals at Avail Brokers will facilitate the successful sale of your business. It is important that you understand what we can do, as well as, what we can't do.
We 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. We can find the right buyer for your business, work with you and the buyer in negotiating a purchase contract, and in every other step of the process until the transaction is successfully closed. We can also help the buyer in all the details of the business buying process, and even help arrange outside financing.
However, we are not magicians 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.