WHY IS SELLER FINANCING SO IMPORTANT TO SELLING MY BUSINESS?
Surveys have shown that a seller, who asks for all cash, receives on average only 70 percent ofhis or herasking 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 for sale that are listed for all cash just don’t sell. With reasonable terms, however, the chances of selling a business increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by offering seller financing for their business for sale. 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 opportunity can, indeed, pay for itself.
WHAT HAPPENS WHEN THERE IS A BUYER FOR MY BUSINESS FOR SALE?
When a buyer is sufficiently interested in your business for sale, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if it is a franchise for sale), or other pertinent details of the business opportunity. 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.
Onceyou 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 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 I DO TO HELP SELL MY BUSINESS?
A buyer will want up-to-date financial information about the business for sale. 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.
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 for sale 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 along every other step of the way until the transaction is successfully closed. They can also help the buyer in all the details of the process of buying a business.
A business broker is not, however, a magician 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 business sale itself.
HOW LONG DOES IT TAKE TO SELL MY BUSINESS?
It generally takes, on average, between five to eight months to sell 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 for selling a business 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 for sale. This theory often “backfires,” because buyers often will refuse to look at an overpriced business opportunity. It has been shown that the amount of the down payment may be the key ingredient to a quick sale. Generally a buyer will put down 50 to 70 percent of the asking price or less, in which shortens the time to a successful business sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business ability to make the payments.
Jay Spencer, President
Voyage Business Brokers
Phone: (303) 290-7449
4610 S. Ulster St.
Denver, Colorado 80237
Selling Businesses Discreetly!