What are the odds of your business actually selling once you have made the decision to sell? Well, if the annual sales of your business are $750,000 or less, research indicates that the odds of your business selling are only 18 percent. If your annual sales are $750,000 to $2 million, your odds increase to 25 percent. If your annual sales volume is above $2 million, the odds increase to 30 + percent. Keep in mind that approximately 75 percent of all businesses have annual sales of less than $750,000. What does this all mean? To put it bluntly: if you are thinking of selling your business, you have about a one in five chance of it actually selling. This obviously begs the question: why are the odds so poor? One would think that if you put your business on the market, it should sell in a reasonable length of time. Here are some reasons why some businesses didn't sell-as explained by various business brokers and intermediaries. They are excerpted from an article in INC magazine, April … [Read more...]

There was a study done, years ago, that showed that the reason businesses were for sale had a direct relationship to its probability of sale. Reason for Sale %Reason for Sale %Probability of Sale Retirement 10-15% 30-35% Health Problems/Death 15-20% 25-30% Partnership & Family Problems/ Divorce 5-10% 15-20% Burnout/Other Business Investments 15-20% 15-20% Under-capitalization 20-25% 10-15% Insufficient Profits 20-25% 5-10% Profit Motivated Only 5-10% 0-5% The above results point out the more serious or valid reason for sale, the higher likelihood that the business will sell. Despite its age the results today would probably be more dramatic. Most of those looking for a business to purchase in today's market would shy away from businesses that are under-capitalized, showing insufficient profits or any in which the seller was just attempting to sell for profit only. Today's buyer is better educated, has more knowledge about business and is more wary than his or her … [Read more...]

Many people who are selling their business think that once they find a buyer, the business is sold. Unfortunately, the real work is just beginning. Once a buyer is interested, there are the inevitable questions that must be answered. After the questions are answered and the buyer has satisfied himself or herself that the financial aspects of the business are satisfied, the buyer is probably ready to make an offer. An offer is prepared and it generally contains contingencies or conditions on which the offer is subject to, in addition to offering the price and terms under which the buyer is prepared to pay. Assuming the price and terms are acceptable to the seller, the next step is for the seller to do what is necessary to satisfy the contingencies. These can be as varied to the buyer's reviewing all of the seller's financial books and records, a serious look at the lease and its terms to a requirement that the seller pave the parking lot or redo the rest rooms. Definitions Offer - an … [Read more...]

Prepare for new management. As soon as you make the decision to sell, begin doing what you can to help the business run "on its own." The business should not, especially now, be just you! Accept the financing facts. You'll likely be financing the sale of your business, since banks are traditionally unenthusiastic about loans for the purchase of most businesses. Make sure your own financials are accurate, detailed, and up-to-date. Get professional help, if necessary, to present yourself well "on paper." Remember - this means seeing yourself in the same light as a prospective buyer, so rethink all those "perks" and hidden assets. Spruce up and pare down. Sell unused equipment and inventory. Nobody will want to pay for it - but they might worry it will get tacked on if they see it lying around. This is a good time to see what else needs a bit of spit and polish to make the best possible impression. Establish a realistic price for your business. Keep your selling plans to yourself, at … [Read more...]

Selling your business is a major decision! You have devoted your time, money and energy to building, running and operating your business. It may well represent your life's work. You have decided that now is the right time to sell, and you want the very best professional guidance available. This is when working in tandem with a professional business broker can make the difference between just getting rid of the business and selling it for the very best price and terms. Below are some of the most common questions asked by sellers. The responses are based on both experience and knowledge. If you have questions of your own, ask your business broker professional. What can business brokers do -- and what can't they do? Business brokers are the professionals who can 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. Business brokers can help sellers decide how to price a … [Read more...]

If you're considering selling your business, and you are employing a professional business broker or intermediary, it's imperative to be absolutely open with him or her. This is not the time for secrecy -- or even for subtlety, especially when it comes to problems. If you've been having trouble with your lease, one of your best customers or your fixtures and equipment, spell it out! Any one of these "sleeping dogs" is bound to wake up sometime during the process. After the first growl comes the bite. The sale will get buried deeper than last year's bone. And the buyer, scared off by the ruckus, will have long since disappeared. Tell your broker all there is to know prior to the beginning of the marketing effort. Your broker and the buyer are aware that there is no such thing as a perfect business, and buyers are much more likely to deal with the problems of your business during the decision-making process rather than after they have decided to buy. And it's not just the sale that's … [Read more...]

1. Not knowing what the business should sell for One of the most costly errors a business owner can make is not knowing the approximate price of his or her business prior to entering the selling process. Although the marketplace ultimately determines the final price, an owner needs to know what the approximate price his or her business is prior to placing the business on the market. Before making the decision to sell, owners should work with someone qualified to place a price on their company. An experienced business broker has both the technical ability and the market experience to produce the most realistic pricing opinion. The business broker will also be the only alternative for supporting his or her opinion by selling the business. Fair Market Value Asking Price is what the seller wants Selling Price is what the seller gets Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept. 2. Not preparing the business … [Read more...]

Buyers Want Cash Flow The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, and look at owners or family compensation. They will consider any excess compensation to employees and family members. Buyers will also look at large one-time expenses such as a new computer system, or remodeling. They will consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner perquisites. These are items that a professional business broker considers when advising a selling client on a suggested selling price. Appearances Do Count The time to replace that old worn-out piece of equipment is before you decide to sell. Don't assume that a new owner will want to do it or that the … [Read more...]

Owners are often asked, "do you think you will ever sell your business?" The answer varies from, "when I can get my price" to "never" to "I don't really know" to everything in between. Most sellers may think to themselves when asked this question, "I'll sell when the time is right." Obviously, misfortune can force the decision to sell. Despite the questions, most business owners just go merrily along their way conducting business as usual. They seem to believe in the old expression that basically states, "it is a good idea to sell your horse before it dies." Four Ways to Leave Your Business There are really only four ways to leave your business. (1) Transfer ownership to your children or other family members. Unfortunately, many children do not want to become involved in the family business, or may not have the capability to operate it successfully. (2) Sell the business to an employee or key manager. Usually, they don't have enough cash, or interest, to purchase the business. And, … [Read more...]

Do have all of your business documentation ready. Everything starts with it. Don't underestimate the value of your business. Owners of privately held businesses usually minimize profits to lower taxes. The financial statements may not reflect the real value of the business. Don't overprice your business. The right buyer who is willing to pay the right price may not even want to consider your business because the price is way out of line. Do offer as favorable terms as you can. Buyers, even good ones, want to leverage the sale as much as possible. Don't use a "magic" formula to value your business. Your business is unique, different from every other business out there. Don't wait too long to sell. The best time to sell is when business is good. Don't wait until poor health or a downturn occurs - sell from strength! Do allow at least six months to sell your business. The larger the business, the more time you should allow. Do use a business broker. They can take the mystery out … [Read more...]