The economy is recovering. Many business owners waited to sell their businesses while the economy struggled, and financing was difficult to obtain because they believed they would need a better price.
One of my responsibilities is to answer calls from business buyers frustrated by the need for more information they require.
The best way to work as a business broker and to help the buyer and seller is to bring both perspectives together. The seller will only ever sell, and the buyer will only purchase if both parties have all the information necessary to make informed decisions and feel that their actions are making sense.
Here are my steps to help you sell your business.
You are making major changes to your life if you sell your business. Owning and running a business requires discipline, which can often mean doing things you don’t want to do. What do you do if you have to sell your business?
It would help if you were clear about the possibilities and new world that opens up to make it easy for your business to sell. A business owner may change their mind after closing escrow. They must determine what to do with the company if it is sold. A business owner may decide to sell their business or buy another after being bored. You can still own and run your business, but you should take care of your health and do some things you enjoy. Owners who are burned out are the top reason they sell their businesses.
A business valuation is the best place to start when you are ready to sell your business. A business valuation does not have to cost thousands of dollars. It doesn’t need to be complicated. A certified appraisal might be required if the business owners have partners involved in a dispute or are going through a complex legal matter. An opinion of value was prepared for $750. It includes the past three years’ tax returns, current profit and loss, and balance sheet. This information is combined into a 19-page report, providing comparable sales data from the same industry. It then helps to determine the price at which the business can be sold. It is important to review the profit and loss statements and tax returns. Many sellers provide financial statements that need to be corrected or are unacceptable to buyers or lenders. Recently, a buyer asked me to appraise a small company based on cash flow projections that the seller had created. I convinced him it was worth the price. I got meaningful documents and information after finally proving my worth. There needed to be better in the seller’s projections.
If the seller still determines the business’s value and wants to continue, I will help him determine if third-party financing is available. Many sellers would prefer to sell their business or take on financing. SBA lenders are the most popular form of lending for small businesses. Although these banks may be willing to approve an SBA loan, they can only lend to some companies. I have been known to approach multiple banks before obtaining pre-qualification for a business. The seller can plan better, and the process will be faster if a qualified buyer comes.
Once you have all the details, the next step is creating a confidential business report. You can make the confidential report as detailed and long as you need. The rule of thumb is that the longer the confidential reports are, the more expensive they will be. Buyers may have questions. Many buyers will have the same questions. This information should be available. The seller, their company, and I look professional if we request that a buyer sign a non-disclosure agreement. In my case, they will then be given a username/password to access this confidential report and supporting documents like a copy of the lease, franchise agreement, or sample marketing material.
These items require planning and time.
You must take the time to prepare if you want to sell a business. Buyers have options. Buyers have options. If they feel that your business is not the right choice because of how their questions were asked or the answers they received, they will seek alternatives.
Andrew is a five-time business owner who helps entrepreneurs exit and enter business ownership. He can help owners sell or buy an existing business and consult about buying a franchise. He offers certified equipment and machinery appraisals, as well as business valuations.