Questions & Answers Our Business Brokers Often Come Across
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. Our business brokers will help you zero in on a good price to list your business at in the beginning.
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 that our business brokers will help you develop, 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. Our business brokers can help you sift through the details and help you see what 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 advisers to help them review the information. When all the conditions have been met, final papers will be drawn and signed, and 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 – our team of business brokers will do all we can to make the process as seamless and swift as is possible.
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 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 salable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. That being said, 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.
Suggestions From Our Team of Omaha Business Brokers:
- Start Early – Selling a business takes at minimum several months – and that’s if everything is already in order. Significant planning is involved.
- Have a Clear Reason to Sell A Business – Selling may not be your only option.
- Get Your Financials in Order – Restructure your financial statements so they’re easy to read. You should have the past three years of financial statements and tax returns available for the buyer.
- Build a Mini-Business Plan – Selling a business requires sales skills. Develop a business plan to sell to potential buyers, which includes your business’ financials, sales, the business plan, industry projections, recent improvements and other important aspects of your business.
- Know Your Worth – Valuing your business is a necessary task when you decide to sell. There isn’t a single formula that can accurately determine the worth of your business.
- Stay in Business While Preparing to Sell – It takes most U.S. businesses four to 12 months to sell. Selling your business may be an incentive to increase sales, profits and the selling price.
- Add Value to the Business – If you have rusty equipment, replace it. If possible, sell off assets that aren’t generating revenue.
- Consider Hiring a Business Broker – Brokers have buyer contacts, marketing avenues that can speed up the sale of your business. They usually are not accountants, tax professionals, or attorneys, which should also consult to make sure all aspects of a sale are handled properly.
- Know the Market – Even if you have a broker, it’s important to monitor whether your industry or the economy is about to slow down or grow. Growth potential is key for potential buyers, who are often looking to invest in an emergent market or business.