We have worked with hundreds of sellers over the years, and our experience tells us that there are five important questions that every Seller should address before placing their business on the market:
When is a good time to sell my business ?
A number of considerations must be carefully thought out before making the actual decision to sell.
Businesses do not sell overnight. Generally it takes time to properly market a business, and expose it to sufficient buyers to ensure the very best price possible. Therefore, you must allow for this time constraint as part of your overall plan to sell.
Has your business been properly prepared to go on the market? Are your books and records up to date? Has the building and equipment been properly maintained? If there is a premises lease, is it assignable to a buyer? Are all permits and licenses in place to operate legally? We have a complete check-list for your convenience in doing a comprehensive job of showcasing your business to the most persnickety buyers.
What is the overall condition of your local market, your industry, and the national economy?
Is this the right time, or are you better off waiting for a while until these uncontrollable factors are in your favor?
Are your sales or revenues consistent, or are they affected by the ups and downs of seasonal issues?
There are other factors to consider such as your health, personal issues, and motivation to retire. We have worked successfully with Sellers concerning these and many other issues over the years, and we are confident that we can prepare a sales package that will be to your liking.
Can my business be sold ?
Urban located Sellers generally always have competition to contend with when they decide to sell their business, and Buyers usually have their choice of a number of businesses that may be similar to yours. Therefore, it is extremely important to contract with an experienced Business Brokers who can assist you in determining the results of a S.W.O.T. analysis of your business. This means carefully evaluating all the Strengths, Weaknesses, Opportunities, and Threats that will help in applying the right price, terms and conditions to the sales package. Once all issues have been flushed to the surface we can separate all problem areas for creative solution. Once this is accomplished we find that successfully selling your business is nothing more than applying our comprehensive marketing program to the task of exposing the business to as many potential buyers as possible. When properly priced, packaged and marketed, most businesses sell in less than one year.
How much is my business worth ?
Despite the various valuation methods and rules of thumb that are used to price businesses, the ultimate selling price is very heavily weighed by the motivation of the Seller and the Buyer. A Seller who has not properly thought out his plan to sell in advance may well find himself in this position when he is presented with an offer to purchase. Therefore, we at AZBB stress the importance of developing a proper exit plan in advance of actually placing the business on the market. This approach will generally help the Seller realize a price that is close to what he has been asking as opposed to a price cut that can sometimes be 30% to 40% or more.
Most Business Brokers, due to the fact that they are constantly selling businesses in the marketplace, generally have access to other comparable business sales for your type of business. This information when blended with other evaluation tools, and tempered with experience, can generally provide a “ceiling” and “floor” price for the sale of your business.
AZBB also provides a fee based service for formal business appraisals (See our section under Business Valuation Services).
What is the sales process ?
Shepherding a business sale from beginning to end is full of details and potential for mistakes to happen. That is why we at AZBB offer a complete check-list of action points that need to be satisfied at step in the process.
Following is a brief outline of some of the major steps involved:
- Assisting the Seller to prepare the Business for market
- Reviewing all financial information and developing a Cash Flow adjustment
- Determining a reasonable fair market value for the Business
- Execution of a sales agreement with the Broker
- Broker then prepares a sales and promotion package
- Business is exposed to a comprehensive marketing program
- Broker interviews prospective, qualified Buyers who have signed a Confidentiality Agreement
- Buyer visits the Business for a premises inspection
- Buyer makes an offer to purchase
- Broker negotiates a “meeting of the minds” between the parties
- Buyer financing package is submitted (if appropriate)
- Buyer due diligence is performed on the Business
- A bulk sales escrow is opened and closed. Seller gets his money.
- Seller begins training Buyer in all aspect so the Business.
- Seller moves on into the next chapter of his life.
What marketing steps are involved ?
AZBB offers a comprehensive marketing program that includes many of the following approaches to obtain qualified Buyers:
- We prepare a sales package in detail as well as in generic format for distribution to our Buyer database.
- Business Listings are placed on various Internet websites that are tied in to numerous search engines.
- Local Multiple Listing Service exposure is also provided.
- AZBB has a policy of co-brokering on a split success fee arrangement with all other Business Brokers throughout the states of Arizona and California. Brokers in other states are co-opted by special arrangement.
- Local and regional newspaper advertising
- AZBB will provide other proprietary marketing methods not published here.
- VBBB, IBBA and other Business Brokerage marketing outlets are also used.
No Broker can pin-point exactly when a Business is going to sell. Besides taking all the steps that have been mentioned previously above, there are always the elements of luck, and chemical vibes between the Buyer and the Seller that cannot be pre-determined. Generally speaking though, about 80% of small to medium sized businesses sell within six months provided that they have been properly priced and marketed. The remaining 20% may take longer due to issues such as a poor location or some other inhibiting factor beyond the Seller’s control.
Experienced Business Brokers know what it takes to sell businesses, but they are not magicians. Businesses that are overpriced, and have other structural challenges to contend with will take much longer to sell. Ultimately, the marketplace determines the price of a business, and both the Seller and the Broker need to be sensitive to this fact. Our job at Arizona Business Broker is to bring value added to the table. We pride ourselves on providing quality service to our clients, and we would be honored to serve you!
