Selling a Business From a Position of Strength
The economy continues to heal. Many entrepreneurs were reluctant to sell their business while the economic performance was poor and the funding difficult to obtain because they believed that they would not get the best price for the business.
My job is to get calls from shoppers who are frustrated, motivated to buy a particular business, but not get the answers they need, and wonder if I can help.
When I bring the two perspectives together and how I work best as a broker with the seller and / or buyer, it is to give both parties the opportunity to do things from a position of strength. At the end of the day, the seller will only sell and the buyer will only buy if all parties have the information they need to make an informed decision, and at least feel that what they are doing is for them Makes sense.
If you plan to sell your business and do things from a position of strength, I’ll follow the steps below to make sure I’m helping you.
If you plan to sell your business, you are fundamentally changing your life. By definition, owning and running business force disciplines means that you often do things you would rather not do. What are you planning to do when you sell your business and make this important change? Be clear about the new world and the options that open up to you. When your business sells, you can easily make the transition. It is not uncommon for a business owner to end the trust agreement and change his mind because he is not sure what he would do if he were to sell the business now. It is also not uncommon for a business owner to sell the business and buy another business after a period of downtime because he is bored. While you own and operate your current business, watch your health, play golf, or do things you want to do to keep your balance and keep you from burning out. Burning out is the main reason why owners sell their business.
When it’s time to sell the company, the first step begins with a business valuation. It is not necessary to spend thousands of dollars on a rating because it does not have to be complex. If the company has partners and they are in a dispute, the owner is going through a divorce or other complex case, a certified assessment may be required. I have prepared a valuation for approximately $ 750, which includes the tax returns of the last three years and the current income statement and balance sheet. All this information is then summarized in a 19-page report that includes comparable sales data from sales in the same industry to determine a price that the company will sell. Looking at tax returns and profit and loss accounts is critical as too many sellers offer inaccurate financial statements that a buyer or lender would not accept. Recently, a buyer asked me to rate a small business based on the seller’s cash flow forecasts and convince the buyer that his business has value. When I finally got meaningful documents and information, my value was less than half the sellers, as there were mistakes in his projections.
Once the seller knows the value of their business and still wants to continue, one of the steps I take is to see what leverage is available. Most sellers do not want to sell the business and do not carry any finances. Currently, the main form of lending to buy a small business is the SBA lenders. These banks will try to lend an SBA loan but will not lend to all companies in all sectors. It is not uncommon for me to turn to many banks before I get a company pre-qualified. However, knowing the available funds will help the salesman in planning and speed up the process if a qualified buyer is added.
With these details in hand, the next important step is to put together a comprehensive, confidential report on the business. The confidential report can be as long and detailed as necessary. As a rule of thumb, the higher the purchase price, the longer the confidential message. Buyers have questions. If there are many buyers, you can assume that many questions are the same. Why do not you have this information ready? The seller, his business and I look very professional when we ask a buyer to enter into a non-disclosure agreement. In my case, we give him a username and password for which I have this confidential report, as well as evidence such as a copy of the lease, the franchise agreement, the marketing pattern, the financial statements and other relevant information.
All the above points require time and planning. If you sell a business and want qualified buyers to be factually responsive, take the time to get the job done and get it right. A buyer has options. If they think that your company is not the right option because of the way their questions are asked or how the answers to their questions are given, they are looking for alternatives, and there are alternatives, even if they are nothing do.
Andrew is a five-time business owner who helps entrepreneurs exit or enter the business. His services include assisting owners with the sale and / or purchase of an existing business or advising on the purchase of a franchise. He also offers certified machine and plant valuations and company valuations.
Currently, Andrew has received the Certified Business Intermediary (CBI) from the International Business Brokers Association (IBBA), the highest honor awarded by IBBA, and the Certified Business Broker (CBB) award from the California Association of Business Brokers. He also holds a brokerage license from the California Real Estate Department, is a member of the Sacramento Metro Chamber of Commerce and chairman of the Sacramento Chapter of the California Association of Business Brokers.