Selling a Business Articles


Burnout: An Ever-Present Threat

Burnout is an often-used reason for an owner selling his or her business. Potential buyers may have trouble accepting this as a valid reason for sale. However, burnout is a valid reason for selling one’s business. A business owner can experience burnout even with a business that’s successful and growing. Many independent business owners feel they’ve worked hard, made their money, and now is a good time to cash out and move on, before burnout endangers the health of the business. The following warning signs should remind a business owner that cashing out beats burning out: You are overwhelmed on a daily basis. When a business owner is a one-man show, even small tasks and minor decisions can seem bigger than Mount Everest. These owners have been shouldering the burden alone for too long, and the isolation has taken its toll. You sense a failure of imagination. Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily … [Read more...]

How Long Does It Take to Sell a Business?

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 seller should … [Read more...]

When to Create an Exit Strategy

There is the old saying that the time to develop an exit strategy is the day you open for business. Sounds good, but it’s not very realistic. Further, it also isn’t very optimistic. On the day you open for business, thoughts about how you get out of it aren’t pleasant, or helpful, thoughts. However, as you get the business to a place where you have a bit of extra time to plan, you will find that the things you need to do to improve your business are some of the very things you will need to work on to plan an exit strategy. You can’t predict misfortune, but you can plan for it. One never knows when an accident or illness will force one to sell. When the drive to your business becomes filled with dread, maybe it’s time to consider selling. The following ideas will improve your business, even if you’re not currently considering selling. Dealing with these areas will also supply the information a buyer will most likely be looking at when the time does come to sell. Buyers want cash … [Read more...]

Five Kinds of Buyers

Buyers are generally categorized as belonging to one of the following groups although, in reality, most buyers fit into more than one. The Individual Buyer This is typically an individual with substantial financial resources, and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both money and time. The Strategic Buyer This buyer is almost always a company with a specific goal in mind -- entry into new markets, increasing market share, gaining new technology, or eliminating some element of competition. The Synergistic Buyer The synergistic category of buyer, like the strategic type, is usually a company. Synergy means that the joining of the two companies will produce more, or be worth more, than just the sum of their parts. The Industry Buyer Sometimes known as “the buyer of last resort,” this type is … [Read more...]

Why Deals Don’t Close

Sellers · Sellers don’t have a specific reason for selling. · Sellers are testing the waters to check the marketplace and the price. (They are similar to the buyer who is “just shopping.”) · Sellers are completely unrealistic about the price and don’t understand the marketplace for their business. · Sellers are not honest about their business or their situation. The reason they want to sell is that the business is not viable, revenues are declining, possible environmental problems, new competition is entering the marketplace or some other serious issues that the seller has not revealed. · Sellers don’t disclose that there are more than one owner and they are not all in agreement. · Sellers have not checked with their outside advisors about possible financial, tax or legal implications of selling their business until an offer is presented. · Sellers are unprepared or misinformed about providing seller financing to complete a transaction. This is key since according … [Read more...]

Seller Financing: The Basics

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 the seller … [Read more...]

What Would Your Business Sell For?

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 the clothes, and … [Read more...]

Selling Your Business? Expect the Unexpected!

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...]

Rating Business Buyers in Today’s Market

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 downside.  … [Read more...]

Why Sell?

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. Losing … [Read more...]

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Matt Coletta, CBB, CBI, is a Certified Business Broker and a Certified Business Intermediary with over 25 years of experience in successfully representing Business Sellers and Buyers in various industries. Matt is a Los Angeles Business Broker and represents Business Owners and Businesses for Sale throughout Southern California including: Los Angeles County, Orange County, Ventura County, West Los Angeles, City of Industry, Downtown Los Angele, Gardena, Whittier, San Gabriel, Upland, South Bay, Torrance, Newport Beach, Irvine, Brea, Anaheim, Long Beach, San Fernando Valley, Woodland Hills, Chatsworth, Sherman Oaks, North Hollywood, Northridge, Van Nuys, Burbank, Glendale, Pasadena, Sun Valley, Valencia, Santa Clarita, Palmdale, Ventura, Camarillo, Oxnard, Thousand Oaks, Simi Valley and other cities in the greater Southern California area.