It may be the most valuable piece of advice you're getting in your entire business life. Do yourself a favor, spend five minutes reading it through and learning what does and doesn't work for selling a small business in today's market.
First, you have to decide whether you're going to do it on your own or get help from a business broker. You have to be aware that the process of selling a business takes a lot of time and requires specific knowledge. Although you may know your business well, it doesn't make you an expert in selling it.
Simply placing ad on Craigslist won't do you any good. I know, it may generate a lot of response and you may get a false impression that there are a lot of potential buyers interested in your business, however majority of them are tire-kickers - about 80-90%. Free advertising media, like Craigslist, although working well for selling smaller items and services, doesn't work for selling businesses. It's very sad and frustrating to learn that you wasted a month or so of your valuable time on a single unqualified buyer. And you will have many such buyers unless you know how to screen and pre-qualify them.
If you, like most business owners, have pretty hectic schedule, it will be very hard to combine running a business with servicing buyers. Every buyer assumes that he or she is the only one and requires your undivided attention. With every buyer you have to do the following.
- Assure confidentiality. You don't want your employees, vendors, customers and landlord to know about the sale.
- Screen and pre-qualify buyers financially and professionally. Your time is the most valuable commodity. Don't waste it.
- Prepare your business' profile and financial statements, answer questions and explain outstanding data. Additional information may be required.
- Follow-up, follow-up, follow-up... Buyer may be reviewing several businesses at once and may simply forget about yours. You have to constantly remind about yourself.
- Schedule business tours. At some point every buyer wants to see the business. Most of the time these tours are scheduled before or after working hours to avoid contact with employees.
- Negotiate terms of the purchase agreement. You have to stay calm and try to make the deal beneficial to both sides.
- Prepare the documentation and submit to escrow.
- Maintain a log of activities and current status with every single buyer
In today's buyer's market you have to be very prompt with your communication otherwise buyers lose interest, turn around and start looking for other opportunities. When they walk away, it's practically impossible to win them back.
If it seems like too much work in addition to running your business, you have to seriously consider getting help from a professional business broker. Qualified business broker will take over all the above activities and considerably minimize your interaction with buyers, as well as offer help in business valuation, advise how to prepare your business for sale and maximize the purchase price.
Obviously, you have to pay commissions for business broker's services, around 10% for businesses priced under $1 million. Is it a lot of money? It depends on how you look at it. In most cases hiring a business broker makes a difference between selling and not selling the business. It's even more so if your business is in less than perfect shape. Most definitely, a business broker can sell your business much quicker than you can do on your own.
If your business is declining, and most businesses are in the current economy, every week of a delay causes you to lose more money. If you have to sell urgently due to personal or business circumstances, you don't have time to play around. You have to get it sold as soon as possible.
Beware of hiring real estate brokers who occasionally sell businesses. Although they may charge less, they don't know specifics of selling businesses and will do more harm than good. Ask agent if selling businesses is his or her full-time job.
Now, as you've read this far, lets see how business brokers with Global Business Group, leading California small business brokerage firm, can help you to sell your business quickly.
1. We start with business valuation (appraisal) and analysis. It is very important to correctly calculate the purchase price. You don't want to overprice your business because it won't sell. Do not try to "probe the market", it never works. Only correctly priced businesses will sell. On the other hand, you don't want to leave any money on the table. Global Business Group offers free business valuation services to clients who decided to list with us.
2. It pays off to spend more time on preparing business for sale. It usually increases chances of selling, and the purchase price. Our business brokers work very closely with business sellers gathering necessary information, preparing Business Profile and re-casting financial statements, to present your business in the most attractive way to prospective buyers.
3. Means of advertising vary greatly depending on business type, size and geographical coverage. Majority of businesses are advertised through internet business listing services. However, sometimes it may require to advertise with trade magazines or contact potential buyers directly. Marketing team at Global Business Group creates discrete advertisement and determines the best advertising strategy for each client individually. It's worth mentioning that advertising with one business listing service may easily run around $50-100 per month, or even more. Global Business Group is publishing ads with 8-10 major business listing services at no additional cost to our clients. All advertising cost comes out of our pocket. Beware of business brokers asking any money upfront - it's a BIG RED FLAG!
4. Having intermediary involved is very important for preserving confidentiality of the transaction. You don't want business buyers starting walking around and questioning your employees, vendors or customers about your business operation and performance. It will start a rumor mill, causing vendors to revoke credit terms, employees starting looking for new employment, etc. Global Business Group never reveals our client's business name or location until proper confidentiality agreement is signed by the buyer.
5. It's not a secret that around 50% of buyers inquiring about a business for sale are not qualified to buy it for one reason or another. Yet, it may take weeks before you find out about it. Multiply it times 25-30+ buyers and you can see how much time can be wasted. It is very important to pre-qualify every buyer early and eliminate tire-kickers. Our business brokers do it diligently with every single buyer.
6. One may assume that once inquiring about your business for sale buyers will continue their communication until he or she makes a final decision. One week later, still not hearing anything back from a buyer, you start wondering what's going on: if she is still interested, did she get the information that you sent her via email, etc. You would probably call and ask, however, you may be afraid that your call may be considered as a sign of despair, and you're feeling that buyer should be calling you, not the other way around. Besides, if you're working concurrently with several buyers you have to keep a very clear record of each communication, current status and follow-up activities. Yes, follow-up is very important, and organized record keeping is very important too. Our business brokers use proprietary database for record keeping and scheduling follow-up activities. As a neutral third party we can communicate with both sides without weakening client's position.
7. It's not a secret that all business owners are trying to minimize their tax liability. Sometimes small business owners charge their personal or family expenses to a business. It may work to their benefit while they run a business, however it works against them when they decide to sell. When selling, you'd like to show more income, because more income translates to higher value, hence increasing the purchase price. Our agents do necessary adjustments to your financial statements, reflecting correct unbiased performance of your business. They will professionally prepare Confidential Business Profile, recast financial statements and compile all necessary information about your business that may be required by the buyers.
8. Properly orchestrated negotiation can make a difference between having and not having a deal. There is a lot of electricity in the air when people negotiate a lot of money. Simple misunderstanding may cause an argument and terminate the deal. Having business intermediary as a neutral third party helping with your negotiations will bring calm, business-like atmosphere and assure success.
9. After the Purchase Agreement is executed by both parties most business sale transactions are closed in escrow. Majority of escrow companies do not perform business sale transactions. There are only a few selected offices with no more than one escrow officer qualified to perform this duty. Having knowledgeable and responsive escrow officer is very important. She can not only save you money, but also help with drafting necessary documentation and keep informed about escrow progress. Experienced business broker can suggest you qualified escrow company near you. Finding knowledgeable and dedicated business broker isn't easy. Don't rely entirely on reputation of the firm alone, because, after all, you're working with one particular agent and your success depends on that person alone. Ask the agent how many deals he or she closed within last year and ask for references. Ask if you have the right to terminate the agreement if you're not satisfied with their services. Walk away if you don't have such rights.
If you feel that getting help from a business broker is worth considering, please contact us. Ask us questions. We encourage you to ask many questions. You have to feel comfortable working with us. We think that you deserve to be rewarded for sleepless nights and countless hours you spent on developing your business, and will do whatever it takes to make your business sale a success.