Recent studies indicate that it takes, on average, about eight to ten months, from the time you go to market to sell a business. This figure seems to increase yearly. Why does it take so long to sell a business? Price and terms are the biggest reasons!  It is very important not to overprice the business at the beginning of the sales process. Motivated and educated Buyers are on the side line waiting for new businesses to come out. A business will also sell more quickly if there is a reasonable down payment and a seller carrying-back note.  Having all of the necessary information right from the beginning can also greatly reduce the time period. Do not under estimate how long this can take.  Finally, being prepared with the information a buyer most likely will want to review or having the answers to commonly asked questions is important so that you don't lose momentum. In other words, be prepared. Here are some basic items a prospective buyer will want to review and a … [Read more...]

Seller financing has always been a mainstay of Business Brokerage.  Buyers typically don’t have the capital necessary to pay cash, are unable to borrow the money, or are reluctant to use all of their capital.  Buyers also feel that a business should pay for itself and are wary of a seller who wants all cash or who wants the carry-back note secured by additional collateral. What sellers seem to be saying, at least as perceived by the buyer, is that they don’t have a lot of confidence in the business or in the buyer or perhaps both.  However, if you look at statistics, it’s apparent that sellers usually receive a much higher purchase price if they accept terms. Studies reveal that, on average, a seller who sells for all cash receives only about 80 percent of the asking price.  Sellers who are willing to accept terms receive, on average, 86 percent of the asking price. The seller who asks for all cash receives, on average, a purchase price of 36 percent of annual sales while … [Read more...]

There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register. When his youngest son graduated as a CPA, he was appalled by his father’s primitive bookkeeping system. “I don’t know how you can run a business that way,” his son said. “How do you know what your profits are?” “Well, son,” the father replied, “when I came to this country, I had nothing but the clothes I was wearing. Today, your brother is a doctor, your sister is a lawyer, and you are an accountant. Your mother and I have a nice car, a city house and a place at the beach. We have a good business and everything is paid for. Add that all together, subtract … [Read more...]

According to the experts, a business owner should lay the groundwork for selling at about the same time as he or she first opens the door for business. Great advice, but it rarely happens. Most sales of businesses are event-driven; i.e., an event or circumstance such as partnership problems, divorce, health, or just plain burn-out pushes the business owner into selling. The business owner now becomes a seller without considering the unexpected issues that almost always occur. Here are some questions that need answering before selling: How much is your time worth? Business owners have a business to run, and they are generally the mainstay of the operation. If they are too busy trying to meet with prospective buyers, answering their questions and getting necessary data to them, the business may play second fiddle. Buyers can be very demanding and ignoring them may not only kill a possible sale, but will also reduce the purchase price. Using the services of a business broker is a … [Read more...]

Making the initial decision to sell is tough, but once that decision is made, there are many diverse options.  Small businesses are more sophisticated than ever, and the individuals purchasing these businesses are complex and come from varied backgrounds.  Here is an overview of the most active categories of business buyers in today's market: Groupings of Family Members People within a business owner’s own family often opt to buy the family business. In fact, this stands as one of the more common types of small business buyers.  One reason is that business owners are more comfortable with a relative taking over the prized business, as they often built it up from nothing.  Quite often the family member looking to take over the family business has been carefully groomed and tested over the years to ensure that he or she is ready to be the true "heir apparent."  In this kind of situation, the family member truly is the best person to buy the business. However, there is a … [Read more...]

There are a number of different reasons why selling a business can be an emotional event. The business may have been in the owner’s family for generations. The owner may have built it from scratch or bought it and then poured the necessary energy into it to grow it into a successful, profitable business. For these and many other reasons, “seller's remorse" is actually one of the major causes of a deal falling through. However, despite the emotional ties to a business, there are times when selling is the best course to take. Here are just a few examples of those times. Burnout According to industry experts, burnout is a major reason owners consider selling their businesses. Over time, the long hours and 7-day work weeks can take their toll. On the opposite end, business owners who thrive on challenge may get to the point that the business has just become boring - the challenges of creating it or growing it has been replaced with the mundane daily activities of running it. … [Read more...]