What Can Business Brokers Do?
Business Brokers are the professionals who will facilitate the successful sale of your business. We can help you decide how to price your business. We work with you and the Buyer in negotiating and coordinating every step of the way until the transaction is successfully closed. We also help by guiding the Buyer in all the details of the purchasing process.
A Business Broker is not, however, a magician who can sell an overpriced business. Most businesses are saleable if priced and structured properly. 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 the success of the sale itself.How Long Does it Take?
It generally takes, on average, between three to four months to sell most businesses. Some businesses will take longer to sell, while others will sell quickly. The sooner we have all the information needed to begin marketing, the shorter the selling cycle should be. It is also important that the business be priced properly from the start. Most Buyers will often refuse to look at an overpriced business.
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% 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 businesss ability to make the payments.Why is Seller Financing Important?
Surveys have shown that a seller who asks for all cash, receives on average only 70% of their asking price, while sellers who accept terms receive on average 86% of their asking price. This means that for a business that is priced $300,000 the Seller is willing to accept terms will get, on average, $48,000 more than the 100% cash deal.
In many cases, businesses that are listed for all cash just dont sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most Sellers are also unaware of how much interest they can receive by financing the sale of their business.What We Need to Get Going
In addition to our standard Listing Agreement we will need the following:
Last 3 to 5-Years Financial Statements Including Tax Returns
List of Furniture, Fixtures & Equipment
Inventory (if applicable)
. . . and most of all . . . We need to be open and honest with each other and work closely together to get the job done! What Can I do to Help Sell My Business?
Any Information About Your Business That Would be Helpful in Selling
You can cooperate fully with us and any other Professionals that you are using. 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 are able to make time for you when you need them. Time is the essence in any business sale transaction. Failure to close on schedule permits reconsideration and changes to the original proposal. Most critical is that your team of advisors must all be working toward the common goal of selling your business for the best price and terms available in the marketplace, and closing the sale as quickly as possible! Remember as your professional business broker, we are on your side.How The Purchase of a Small Business Is Financed.
Home equity/pension funds/insurance cash value
The typical business purchase involves the following elements:
Seller financing (usually)
Institutional financing (rarely)
- Usually 20%-50% of the purchase price comes from the Buyers cash reserves. A Seller or bank is usually unwilling to finance any portion of the purchase without a significant commitment from theBuyer. The Buyer must also consider reserves to be used for operating capital.Seller Financing
- Sellers will consider financing as a way to receive the full value of the business. Seller financing supports the idea of confidence in the business as well as a continued commitment to success, both of which are appealing to Buyers. Such financing is usually structured as a term loan, consulting agreement, or non-compete agreement.
A Seller who asks for all cash, receives on average only 70% of their asking price, while Sellers who accept terms receive on average 86%of their asking price. With reasonable terms, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Additionally, interest received by the Seller financing the sale enhances the total value of the transaction.Institutional Financing
- Government secured loans are available in some cases and will include a review of the Buyer and the business to be financed. Institutional financing usually requires the Buyers personal guarantees and subordination of any loans made by the Seller.Principal