Selling Your Business Frequently Asked Questions
Why Use a Business Broker?
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 Do Business Brokers Charge?
What type of Agreement would a seller have with a Business Broker?
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.
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 do I keep the sale of my business confidential?
How long will it take to sell my business?
Will I be able to transfer my long-term lease?
How do I include unreported income in the value of my business?
What will your services cost if I already have a buyer?
Do you cooperate with other business brokers?
At what price should I sell my business?
Should I have a business valuation done?
Do I have to put an asking price on my business?
My business is located on property that I own. Do I have to sell it also?
What happens to the cash and accounts receivable?
The business has a lot of debt, what happens to the debt?
What information is going to be needed to sell my business?
How far in advance should I begin to prepare to sell my business?
What steps can I take to improve the value of my business?
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?
Do I need an attorney or an accountant?
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?
How do you market my 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.