Rating Today’s Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex. The following are some of today's most active categories of business buyers: Family Members Members of the seller's own family form a traditional category of business buyer: tried but not always "true." The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the "heir to the throne." If this has been done, the family member may be the best type of buyer. Too often, however, the difficulty … [Read more...]

Today’s Business Buyer: A Profile

Today's independent business marketplace attracts a wide variety of buyers eager for a piece of ownership action. Buyers of small businesses are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit. This is the broadest possible look at the types of buyers out there. Business owners considering putting their business on the market should be aware of the finer "distinctions" among buyers, as well as what they are looking to buy, and why. 1. Individual Buyer This is typically an individual with substantial financial resources and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both time and money. If these buyers do not have the amount of … [Read more...]

Why Do Deals Fall Apart?

In many cases, the buyer and seller reach a tentative agreement on the sale of the business, only to have it fall apart. There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves--and such an awareness should include facing potential problems before they swell into floodwaters and "sink" the sale. What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business. The Seller Fails To Reveal Problems  When a seller is not up-front about problems of the business, this does not mean the problems will go away. They are bound to turn up later, usually sometime after a tentative agreement has been reached. The buyer then gets … [Read more...]

Are You Buying (or Selling) a Business?

Are you considering purchasing a business? Here are some basic pointers to get you started.  Incidentally, this article should also be of interest to anyone thinking of selling their business. At Provest Properties, we've found that the process becomes easier when both the buyer and seller have information and knowledge. What's the Profile of a Typical Buyer? The typical small business buyer is often looking to get out of an uncomfortable job situation or deal with a lost job.  Most of these buyers have never owned a business. A buyer will more than likely have less than $100,000 in which to invest in the purchase of a business.  More than 70% of buyers will have less than $250,000 to invest.  A buyer's funds will usually come from personal savings and additionally from family members. Potential buyers are looking to do their own thing and they want to break free from the cycle of working for someone else.  While making money is on their priority list, this typically isn't the … [Read more...]

What Can Make a Deal Fall Apart?

It goes without saying that from time to time, deals do fall apart.  However, when both buyers and sellers understand potential pitfalls, they are more likely to be overcome.  Let's take a look at some of the more common reasons why this happens.  The following is a compilation of factors taken from a survey of business brokers across the United States. The Seller Doesn't Reveal Problems  In some cases, a seller simply is not upfront about problems facing the business.  These issues do show up later, and this often occurs after a tentative agreement has been reached.  The buyer ends up getting cold feet and the deal falls apart.  The way to solve this issue is that sellers must be upfront about any negative aspects facing the business.  Ar Provest, we attempt to ferret out problems at the beginning of the process; there are steps that can taken to overcome these issues. Second Thoughts About the Price  Another reason that can cause a sale to fall apart is when a buyer … [Read more...]

Why should you consider seller financing?

In today’s marketplace, a seller should expect to finance some portion of the sale.   Financial institutions today are asking for sellers to take back some piece of the sale price, especially if the intangible portion of the sale is an unusually high percentage of the price.  When reasonable terms are set up, the chances of selling increase and the time period to sell decreases.  Many sellers don't realize how much interest they can receive by financing some or all of the sale of their business.  In some cases, the amount received greatly increases. One important point that is easy to overlook is that allowing for seller financing tells the buyer that you have confidence that the business can, indeed, pay for itself.  Of course, not all sellers are in a position to carry.  Each situation must be analyzed and reviewed.  At Provest, we can help you make the right call. … [Read more...]

So I have a buyer for my business- what happens now?

When you have a potential buyer, the first thing to expect would be to get an offer in writing.  When you look at this proposal, you may find contingencies, which deal with a detailed review of your financial records, financing and/or environmental issues.  Your buyer may even ask for details of your lease arrangement, and franchise agreement when applicable.  At this point, you can accept these terms or make a counter offer. Of course, if you do not accept the buyer's proposal, he or she can withdraw it at any time.  Even if you aren't pleased with the offer you've received, you should look at it carefully.  Even if it’s lacking in some areas, it might have other advantages, so don't disregard it too quickly The next step of the process takes place once you and the buyer are in agreement.  At this point, you will need to satisfy and remove any contingencies.  You and the buyer must cooperate during this process.  Otherwise, he or she may feel you're hiding something.  Don't be … [Read more...]

Is there something I can do to help sell my business?

It goes without saying that a buyer will want up-to-date financial information. Work with your professionals to make all current information available.  Make sure that your attorney is familiar with all laws and the business closing process.  If you have an attorney, you may also want to check to see if he or she could participate at a closing on short notice.  You wouldn't potentially want to have to wait for an attorney to make the time to prepare documents or attend the closing.  When it comes to any business sale transaction, time is of the essence.  When parties don't close on schedule, the buyer could reconsider or make changes in the original proposal. … [Read more...]

What are business brokers and what can they do?

Great question! Business brokers are professionals that will facilitate the successful sale of your business.  However, there are certain things business brokers can and cannot do.  For example, they can help you price your business and structure the sale.  They can also assist you to find the right buyer and negotiate effectively with that party.  Business brokers can also help buyers to successfully purchase a business. Keep in mind that business brokers are not magicians, and this means that they can't sell overpriced businesses.  If your business is structured and priced accurately, chances are that it can and will sell.  However, only the market will determine what a business will sell for in the end.  There are a variety of factors that can influence a sale including the amount of the down payment you'll accept as well as the terms of the seller financing. … [Read more...]

How long should I expect it to take to sell my business?

In short, the answer to this question depends on many factors.  In general, 80% of businesses close within 12-14 months of listing.  Keep in mind that this figure is just an average.  However, if you get together the information needed to begin the marketing process, the overall time period will decrease.  Pricing your business properly from the start can also make a big difference. While some sellers want to overprice their businesses with the idea that they can always come down in price, this strategy usually backfires.  Many buyers won't even look at overpriced businesses.   Another aspect that can be a key ingredient to a quick sale is the down payment.  When a down payment is lower, the time to a successful sale is typically shorter.  When there is a reasonable down payment it also tells a buyer that the seller has confidence in the business’s ability to make the payments. … [Read more...]