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Selling FAQ’s2020-08-12T14:36:51+00:00

Selling a business FAQs

How do I keep the sale of my business confidential?2020-08-12T14:37:28+00:00
This is one of the many reasons to use a business broker or intermediary. We require every person inquiring about the business to sign a confidentiality agreement. This is called a Non-Disclosure Agreement or a NDA. Additionally, we require buyers to submit a profile which includes some basic information about the buyer’s background and financial information. This is to help determine if the buyer has the ability to buy the business. Even with these steps employees can become suspicious if there are a lot of unusual people or non-typical behavior. We can help you take steps to prevent this unintentional disclosure. Most sellers realize that if employees, customers, or vendors become aware of a pending sale, they may go elsewhere to do business.
What Do Business Brokers Charge?2020-08-05T15:03:19+00:00

Brokers are usually compensated by a commission (normally called a success fee) which is based on a percentage of the sales price. However, every situation is different, and some brokers charge a consulting fee in addition to a commission on the sales price of the business. For businesses that sell for $1,000,000 or less, the commission rate is usually 12%. For businesses that sell for more $1,000,000, the rate goes into a sliding scale where at $50,000,000 the rate will go down to around 2%. For businesses with real estate for sale, depending on the real estate laws in your state, there may be two separate listing agreements. If the seller has a prearranged buyer the rate is negotiable.

Why Use a Business Broker?2020-08-05T14:43:39+00:00

Business Brokers can help people sell and buy businesses, including their estimate of the best business price, ideas on marketing, advice with negotiations, documentation for closing, and other consulting. Look for experience, integrity, professionalism and communication capabilities. Business Brokers can also improve confidentiality, reach more potential buyers and save the seller time while also helping the seller and buyer achieve a mutually beneficial deal.

CONFIDENTIALITY

Business brokers represent the seller and can maintain your anonymity and confidentiality. Lack of confidentiality can be devastating on employees, customers, suppliers, others and ultimately the sales price.

LARGE POTENTIAL BUYER POOL

Business brokers and intermediaries can market your business to a large pool of potential buyers.

OBJECTIVE VIEW AND ABILITY TO HELP NEGOTIATE

Business Brokers have an objective view of your business and can understand both the seller and buyer needs and expectations. Additionally, good brokers are not emotionally attached to the business and have had experience with negotiations between parties, to achieve mutually beneficial outcomes.

SAVING THE SELLER TIME

It takes time to inform, screen and qualify buyers, which can seriously detract a seller from operating their business. Most sellers don’t know what information to have ready for a potential buyer. A buyer who must wait for this information will likely walk away. A business broker can help the seller gather and present important business information, and assess potential buyers for their financial and other capabilities.

What type of Agreement would a seller have with a Business Broker?2020-08-05T14:54:04+00:00

LISTING AGREEMENT

Business Acquisitions, LLC requires a listing agreement to begin searching for a buyer. All the terms are disclosed in this agreement. An exclusive listing allows brokers to use more resources to find the right buyer for the business. Fees are usually based on the sales price and payable only if and when the business is sold. Listing agreements are generally for a minimum of one year. The listing agreement will be a legally binding document. Because of this the seller should have an attorney review it before signing the agreement.

WHAT IS A TAIL?

Practically all listing agreements have tail provisions. What is a tail? The tail on an agreement means that once the agreement has ended, there is still a clause that says if you sell to anyone within 18 to 24 months that the intermediary introduced you to, you still owe the commission or success fee.

COMMISSION SHARING

Business Acquisitions, LLC will cooperate and share commissions with other brokers / intermediaries in some proportion under pre-arranged terms. These terms and splitting of the success fee will be negotiated at the time of the arrangement.

How long will it take to sell my business?2020-08-05T14:53:50+00:00
Smaller businesses that are priced correctly can sometimes be sold in as little as three months. Most of the time even with correct pricing it takes a year or longer to sell the business. Although this may sound like a lot of time, the complexities involved in the transaction, including listing the business, finding potential buyers, interviewing potential buyers, writing contracts, obtaining financing, due diligence and the closing process are all time consuming. Each step can cause delays if the buyer and the seller are not willing to compromise. Owner financing can help speed up the process. Buyers often feel that if the seller is willing to finance a portion of the sale, the seller has the confidence that the business will be able to make the payments. If a seller is willing to accept 40% or less as a down payment more buyers will be interested.
Will I be able to transfer my long-term lease?2020-08-05T14:53:45+00:00
Some landlords will allow for the transfer of the lease. Other landlords will do a lease assignment, but still hold you as a guarantor for the duration of the lease. If the buyer is obtaining commercial financing, the lender will require the lease to be transferred to the new buyer. This is a critical component of the transaction.
How do I include unreported income in the value of my business?2020-08-05T14:53:34+00:00
We recommend businesses report all income and comply with all tax laws. Buyers place high confidence in financial results that are supported by filed tax returns.
What will your services cost if I already have a buyer?2020-08-05T14:53:28+00:00
Finding the buyer is an important part of a broker / intermediary’s role. However, there is a significant amount of work to be performed in advising and closing the transaction. Because you have a buyer, the fee is negotiable.
Do you cooperate with other business brokers?2020-08-05T14:53:22+00:00
Yes, Business Acquisitions, LLC can enter into fee sharing agreements with most brokers.
At what price should I sell my business?2020-08-05T14:53:17+00:00
This is a very complex question. Please go the section in this website on Valuing a Small Business. In general, the value of a business is what a buyer is willing to pay. It is not the value told to you by an attorney, an accountant, a consultant, or someone else. Pricing your business too high will scare away potential buyers and significantly lengthen the time to sell the business. Selling it at too low a price is almost as bad. It is important to have a fair price with reasonable terms.
Should I have a business valuation done?2020-08-05T14:53:10+00:00
Although it is not required, it is strongly recommended. Setting the value of a business is one of the first steps in the process. Business values are based on the ability of the business to generate cash flow, its assets, its reputation, and the relative risk of the business. A valuation can help assure you that you are selling at a fair price.
Do I have to put an asking price on my business?2020-08-05T14:53:04+00:00
Most business buyers want to know an asking price. To estimate a reasonable asking price, Business Acquisitions, LLC uses industry-accepted methods to help the seller determine the best estimated selling price. If a price is too high, the business will not sell, if it is too low then you, the seller, did not get enough money for the business. Not all business have an asking price. In some very hot markets, the lack of an asking price may get some bidding going. However, in these hot markets, the buyers are always aware of the market value. And the buyers know that the seller has a price in mind.
My business is located on property that I own. Do I have to sell it also?2020-08-05T14:52:53+00:00
No, in fact separating the business from the real estate is a best practice. Most buyers want a long-term lease on the property. They may request an option to buy at the end of the lease. If a buyer is obtaining commercial financing for the purchase, the lender will most likely require a long-term lease, unless it is shown that the location is not desirable for the buyers planned business. Some buyers will have excess capacity in their existing location and not want the property. This can all be negotiated in the terms of the deal.
What happens to the cash and accounts receivable?2020-08-05T14:52:43+00:00
In most situations, cash and accounts receivable remain with the seller. However, this may be a part of the sales price of the business. If the value of the business is based on cash flow, the working capital taken out of the business will affect the value and astute buyers will make adjustments to the purchase price. In financing businesses, lenders consider the difference between inventory and accounts receivable a simple timing difference. Some sales involve the use of working capital formulas that have adjustment clauses tied to the seller financing notes to adjust for changes that were not anticipated by the buyer.
The business has a lot of debt, what happens to the debt?2020-08-05T14:52:37+00:00
Most buyers require that the business be debt free when it is purchased. Consequently, at closing most debts are required to be paid off by the seller using the buyer’s purchase payment. Additionally, some type of guarantee of undisclosed liabilities will be required of the seller by the buyer. Sometimes there are provisions for offsets against the seller-financed notes for changes in working capital or other undisclosed liabilities.
What information is going to be needed to sell my business?2020-08-05T14:52:31+00:00
A lot of information will be required. Historical financial statements, copies of leases, notes payable, equipment leases, asset lists, accounts receivable aging and many more documents will be required. Additionally, some narrative description of the business, the reason for selling, profiles on employees and other documents will be required. We can give you a list when the time comes. Good records will make the due diligence process go smoothly.
How far in advance should I begin to prepare to sell my business?2020-08-05T14:52:25+00:00
If you plan on selling your business in the future – today is the day to start planning and preparing. The longer the time frame the better the result will be.
What steps can I take to improve the value of my business?2020-08-05T14:52:18+00:00

Working with a team of advisors that have experience with getting a business ready for sale would be the best first step. They can advise you on potential problems in your business and possible solutions to buyer objections. The more time you have to accomplish these steps the better off you will be.

Work with a business broker / business intermediary, your CPA or accounting firm, your attorney and your insurance agents. Be sure to ask each about their experience in the process of selling your business. In general some of the steps will include:

  • Increase your sales volume every year
  • Develop a management team that can run the business without your involvement
  • Make sure your accounting / financial records are accurate and strong
  • Remove family members from the business
  • Eliminate or reduce personal perks from business expenses
  • Dispose of unproductive assets or idle assets
  • Create a sales force that can operate without your interaction
  • Diversify the customers
  • so that you do not have any one customer with more than 5% of your annual revenue
  • Take care of repairs and maintenance issues as soon as possible
  • Make sure your insurance coverage will be acceptable to a buyer.
How much will I owe in taxes for the sale of my business? Can I minimize these taxes?2020-08-05T15:02:06+00:00

It is not possible to give you a set formula that will tell you how much you will owe. The tax laws are too complex. But, yes there are some things you can do to legally reduce the amount of taxes you will owe. Consulting with a tax professional whom is familiar with the sale of a business process will be an important step.

Do I need an attorney or an accountant?2020-08-05T15:01:55+00:00

Buying or selling a business is one of the most complex transactions that business people encounter. It is possible to do it without professional advisors; however, we strongly recommend that both buyers and sellers have their own experienced professional advisors for the transaction. We have seen many buyers that did not use professional advisors feel that they agreed to terms that have caused them many difficulties after the purchase. Some have agreed to payment terms that were unrealistic to be funded by the businesses operations. Others have failed to properly understand the need for an adequate training and transition agreement.

Buying a business should be a team approach. The selection of the advisors is critical to the success of the acquisition. Attorneys and CPAs that do everything are not the best choice. It is best to find ones that have recent experience in the purchase or sale of a business.

Legal and accounting fees can be significant. Ask your advisors for an estimate of their cost. Some attorneys and CPAs will work for a fixed fee for a specific piece of work. In a certain small purchase we have seen attorney and CPA fees for buyers that were more than 50% of the purchase price of the business. This should never happen, but if you don’t control their fees, it can kill an otherwise successful deal.

I have a unique business. Can a buyer be found?2020-08-05T15:01:50+00:00
Unless your business requires some specific skill or credentials, a buyer can be found. The business will need to have cash flow that will allow a buyer to get a return on their investment and obtain reasonable compensation for their work.
How do you market my business?2020-08-05T15:01:43+00:00

We constantly have a pool of buyers looking for suitable acquisitions. A thorough understanding of your business will allow for us to develop a successful marketing plan for the sale of your business.

There are many methods that have been proven to be successful to complete the sale. Additionally, there are several websites where we describe the business characteristics, without disclosing so much information that your business can be identified.

Do you show my business or do I show the business?2020-08-05T15:01:36+00:00
Once a potential buyer has been qualified and has signed the non-disclosure agreement, we will provide them with a prepared package of information. After they have had time to review the package and ask questions, the buyer will then want to see the business. At that time, we will personally introduce the buyer to you. This is normally done at your place of business. While the buyer is at your business a tour of the business normally occurs. After that point, the buyer may choose to contact you directly. We do recommend that most questions are given to us for an understanding of where the buyer is in the process.
Will my business be listed on internet sites?2020-08-05T15:01:29+00:00
Yes, but it will be listed in a discrete manner that will not make it possible for someone to specifically identify your business from the listing. We use many different websites to promote the sale of the business.
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2261 Northpark Dr # 101 Kingwood, TX 77339.

Phone: 844-535-5500

Web: Business Acquisitions LLC

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