FAQ’s Sellers

Questions & Answers-Sellers

Of course, not all of your questions can be answered here, but these are common ones. I encourage you to call or write for more detailed answers or to ask other questions.

A: The answer is, unlike selling your home where you want as many people as possible to know it is on the market, selling a business requires total discretion and confidentiality. There are several things to be aware of to prevent leakage of a sale to your employees, competitors, vendors and customers, or your business and revenue could be impacted. Each business has to be looked at individually, but in general meeting with me personally or with me and potential buyers has to be staged in such a way to not arouse suspicion from employees. And, normally, employees, perhaps other than key employees, are not told of a sale until just before the transfer takes place, and a new owner can be introduced to them all together. This also depends on the size of the business. A broker who deeply understands and has worked with this situation many times can guide you through it.
A. There are three extremely important criteria in choosing a broker; years of experience, litigation history and references. There is no substitute for years of experience as they hone a broker's skill to a very fine level of competence. The world of business sales is very litigious, so it is important to work with a broker who does not incur lawsuits, as some do. There are companies that do litigation searches so you can see a broker's history, or you can ask a broker about any history of litigation, and hopefully get an honest answer. Lawsuits are expensive no matter how you look at it--- in your time, money and health. Working preventatively and being aware of potentially litigious situations can only come with experience. A personal reference is worth its weight in gold. And, an equally important factor is simply how you intuitively "feel" talking face-to-face with a particular broker.
A. It's normal that no one will be as emotionally involved with your business as you, and especially if you started the company. And, it is normal to over-evaluate your company based on emotion rather than its performance, which is the prime factor in value. In the business sales marketplace, unlike real estate that can gain in value simply with time, a business value is based primarily on its current financial performance, or “Adjusted Profit”. Business assets that are necessary to produce revenue are usually included in that value. Profit alone is usually the primary factor in a buyer having an interestin purchasing or determining a value. My experience allows me to quickly provide a range of value to you based on your financial information, and also assess your company's marketability relative to its performance and status for the current market. In a relatively short conversation I can not only give you arealistic range of value but an opinion of marketability.“Realistic” is important and respectful. Be careful to not only hear what you want to hear.
A. An attorney and accountant each have a very specific and valuable role in the sale of your business. An attorney is licensed and skilled in creating contracts, which does not fall under a broker's area of expertise. There may be several agreements used in the sale of a business whichcan be reviewed by your attorney to be certain they are worded completely "legal" Your attorney may be needed to prepare certain purchase and sale agreements. Accountants and CPA's are trained and skilled in the preparation and understanding of financial statements, and are important in your sale to not only confirm that all financial information is accurate but to prepare any additional financial information that might be necessary for the sale, and, advise you of tax consequences. In the sale of your business, there is a "team" that includes your attorney, your accountant and your broker. Each has its own area of expertise, The only team player who normally has his finger on the pulse of the market, who can evaluate your business appropriately and accurately, who is capable and skilled in marketing your company confidentially, and who understands all the steps in the process of packaging, marketing, presenting , showing, and negotiating your sale.....is your broker. Conversely, I would not offer to create your legal documents other than standard ones, or prepare your financial information. Think of me as "the orchestra leader"--- the person who pulls everything together for you.
A. As they say, "You don't know until money changes hands". For example, any sale is based on and subject to a buyer's "due diligence" period. This is a phase of the transaction that normally begins immediately after an offer is accepted, and focuses on the most important item in the sale---verifying the represented financial information. The due diligence process can take a few days or months depending on the clarity of your information and the complexity of your company. In small businesses your buyer usually will conduct the due diligence with or without help from an accountant, and it normally only takes a few weeks. In larger companies, your buyer will normally have one or more accountants inspecting and analyzing all business records, and this process takes longer. It is the most important condition of your sale, so it must be given much attention. Most sales that "fall through" do so as the result of what is found in the due diligence process. Remember, your buyer is buying your cash flow, your profit. If it is proven to be less than represented, it may either stop the sale or cause the price to be renegotiated. It does not necessarily kill your deal. This is where your broker comes in to keep things together. The other most common occurrence that can stop a sale is an unexpected event during due diligence, like losing a major account and revenue dropping. When your buyer made the offer, it was based on a snapshot of your company at a certain date. If the business performance drops from the level the offer was made, then it is natural for a buyer to want to renegotiate the price. I do not mean to make it sound overly simple, but the most reasonable solution is to proportionally change the price relative to the revised profit. This can be a complicated situation, and have many aspects to it. All potentials situations cannot be covered in this FAQ. Contact me with specific questions.
A. Closing a business sale is somewhat similar to closing a real estate transaction. Some states, like California, use escrows for most small business sale processing and closings while in other states, attorneys handle the processing and closing. In California the time needed to close a small business sale(up to a price of $2 million) is a minimum of about 3 weeks due to the the time required to post a Notice of Bulk Sale to protect the buyer from creditors, published in a local newspaper. But ususally it takes a longer due to property lease transfers and any unexpected issues during the due diligence process. If bank financing is applied for, it can take 2-3 months for funding. In 30 years of selling businesses I have only seen a few transactions close in only 3 weeks, so it is not something to plan on.
For larger business sales(over $2 million) it will most likely take longer to close, and I have seen transactions take 6-8 months due to issues that take time to resolve, and more complex financing challenges. In any case, your business is not sold until final agreements are signed and money changes hands. After discussing your company with me, I should be able to give you a better estimate on time to close.
A. In thirty four years, I have had a buyer ask for a business by name only one time, so I have to say it is not likely to expect a buyer to ask for yours by name. However, what is very common is for buyers to ask me to find a particular type of business for them. So, it is possible at any given time I may have one or more specific buyers who would be interested in your type of business. In reality, focusing on one buyer without allowing others to know the business is for sale, does two undesirable things for you: 1) You can spend a year or more with one buyer only to end up without a deal. When the doors are closed to other buyers, and that one buyer knows it, you have lost much leverage in negotiating your sale and price. And, 2) I have also had countless times, multiple offers on a business I was marketing. With 3, 4 or 5 offers on the table, and a wise and experienced broker, you may end up with a dramatically "sweeter" deal than you could ever have had with only one buyer, plus you may tend not to be at one buyer's mercy, as is often the case. When you have devoted all your time and efforts to one buyer, you find yourself in a deep arrangement, not wanting to lose that buyer, especially with no back up offers in place. As opposed to having only one buyer, it is possible to have a few seriously interested buyers. My advertising is not only national but international, thanks to the internet. My "reach" is equal to the largest brokerage office in the world, and I will normally get thousands of ad views without anyone knowing who you are or exactly where you are located. I have developed a good, safe, proven and successful way to handle the sale of a small or large business confidentially, and I would like to share my thirty four years of experience and knowledge with you, for your benefit.