Patriot Business Advisors
 | |  | |  | |  | |  | |  | |  |
Patriot Business
Advisors is a fantastic
resources for both
buyers and sellers of
business of any size!
- Joseph, Brick, NJ
Advisors is a fantastic
resources for both
buyers and sellers of
business of any size!
- Joseph, Brick, NJ
Are You Ready to Exit? Contact Us
Who is the Buyer?
Buyers buy businesses for many of the same reasons that sellers sell businesses. It is
important that the buyer is as serious as the seller when it comes time to purchase a
business. If the buyer is not serious, the sale will never close. Here are just a few of the
reasons that buyers buy businesses:
• Laid-off, fired, being transferred (or about to be any of these)
• Early retirement (forced or not)
• Job dissatisfaction
• Desire for more control over their lives
• Desire to do his or her own thing
A Buyer Profile
Here is a look at the make-up of the average individual buyer looking to replace a lost job
or wanting to get out of an uncomfortable job situation. The chances are he is a male
(however, more and more women are going into business for themselves, so this is rapidly
changing). Almost 50 percent will have less than $100,000 in which to invest in the
purchase of a business. In many cases the funds, or part of them, will come from personal
savings followed by financial assistance from family members. The buyer will never have
owned a business before, and most likely will buy a business he or she had never
considered until being introduced to it.
Their primary reason for going into business is to get out of their present situation, be it
unemployment or job disagreement (or discouragement). The prospective buyer wants to
do their own thing, be in charge of their own destiny, and they don't want to work for
anyone. Money is important, but it's not at the top of the list; in fact, it probably is in fourth
or fifth place in the overall list. In order to pursue the dream of owning one's own
business, the buyer must be able to make that "leap of faith" necessary to take the risk of
purchasing and operating their own business.
Buyers who want to go into business strictly for the money usually are not realistic buyers
for small businesses. Keep in mind the following traits of a willing buyer:
* The desire to buy a business
* The need and urgency to buy a business
* The financial resources
* The ability to make his or her own decisions
* Reasonable expectations of what business ownership can do for him or her
What Do Buyers Want to Know?
This may be a bit premature since you may not have decided to sell, but it may help in
your decision making process to understand not only who the buyer is, but also what he
or she will want to know in order to buy your business. Here are some questions that you
might be asked - and, should be prepared to answer:
* How much money is required to buy the business?
* What is the annual increase in sales?
* How much is the inventory?
* What is the debt?
* Will the seller train and stay on for awhile?
* What makes the business different/special/unique?
* What further defines the product or service? Bid work? Repeat business?
* What can be done to grow the business?
* What can the buyer do to add value?
* What is the profit picture in bad times as well as good?
Copyright 2007 Business Brokerage Press
A Few Things to Consider
Buyers Want Cash Flow
The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit
down with your accountant or bookkeeper and begin to get your financial statements in
order, with cash flow the order of business. Cash flow is not the same thing as profit. Most
buyers look at the profit and loss statement or tax return, as well as owner or family
compensation. They will consider any excess compensation to employees and family.
Buyers will also look at large, one-time expenses such as a new computer system or
remodeling. They will consider non-cash items like depreciation
and amortization. Interest expenses will be reviewed, as will owner prerequisites. These
are items that a professional business broker considers when advising a selling client on
a selling price.
*Insider Tip
What about the Internet? The Internet is a real "buzz" word - and if its use is appropriate
for your business, then developing a web site is important not only to your on-going
business, but also to a buyer. Many buyers are conscious of what the Internet is doing for
many businesses. If you have a web site for your business, it could be a big plus.
Appearances Do Count
The time to replace that old worn-out piece of equipment is before you decide to sell.
Don't assume that a new owner will want to do it or that the price will be slightly lower
because you haven't replaced it. The time to "spiff up" the business is now, even if you
aren't selling. Fix the sign, replace the carpet, paint the place - make it look good. Even if
you're not selling, it's just plain good for business, and you never know when the time to
sell occurs. Keep-in-mind that anything that increases sales also increases profits and the
all-important cash flow!
Everything Has Value
There are other things that add value to your business. Don't discount the value of
customer lists, proprietary products and/or techniques, well-maintained equipment, secret
recipes, customized software programs, or good employees. These are termed "off-
balance sheet items," and although not used in most pricing models, they add to value.
Look at your business very carefully so you don't overlook those items that make your
business more attractive to the buyer.
Eliminate the Surprises
Long before you put your business on the market eliminate the surprises! Review every
facet of the business and remedy any problems that could appear during the sale
process. No one likes surprises - most of all potential buyers. Whether legal, accounting,
environmental, or anything else - solve it now.
*Insider Tip
This may sound like something that should have been done when the business first
started, so it may be "after-the-fact". You should create an operations manual. You may
already have ,started one years ago, or simply, have thought of doing one. Now is the
time. It may actually create added value to the business. Even if it doesn't, it will impress
buyers that you have your business "act" together and should help you sell more quickly
and effectively. Preparing a manual on how to operate your business can also be helpful
even if you don't want to sell. It doesn't have to be elaborate, just cover the basics. A
collection of ads that you have placed a catalog or sample of products, publications, or
menus (if the business is food related) is also impressive. Include anything to do with the
business that might be helpful for a new owner. However, don't include anything that is
proprietary, such as customer lists, suppliers or secret recipes, etc.
Copyright 2007 Business Brokerage Press
You Can Help!
We look forward to working with you in finding a suitable buyer for your business. You, as
the seller, are an integral part of the total marketing program. We would like to offer a few
friendly recommendations that will help in our marketing efforts. We have checked those
items that we think will be especially applicable to your type of business.
It might also be helpful if you took a good look at your business from the perspective of a
buyer. Try to put yourself in the place of a prospective purchaser of the business. What
would you do to make it more attractive or more saleable? Obviously, the financial records
of your business are critical to the sale of your business, but how it looks is also
important. First impressions really count! If a potential buyer doesn't like the appearance
of your business, the rest of it may never get a chance. If you have any questions, please
don't hesitate to call us. It's only by working together that we'll get the best results.
You might want to check the following to see if any of them are applicable:
* Keep normal operating hours. There may be a tendency to "let down" when you put your
business up for sale. However, it's important that prospective buyers see your business at
its best.
* Repair signs, replace outside lights, etc. You don't want your business to look as if it has
been neglected.
* Maintain inventory at a constant level. If you let your inventory slide, your business will
look neglected. If anything, increase it so your business will look busy.
* Remove items that are not included in the sale and unnecessary items, especially if
inoperative.
* Repair non-operating equipment or remove it if you are not using it.
* Tidy-up outside premises.
* Spruce-up the inside of the business.
Copyright 2007 Business Brokerage Press
Common Seller Questions
How long does it take to sell my business?
It generally takes, on average, between five to eight months to sell most businesses. Keep
in mind that an average is just that. Some businesses will take longer to sell, while others
will sell in a shorter period of time. The sooner you have all the information needed to
begin the marketing process, the shorter the time period should be. It is also important
that the business be priced properly right from the start. Some sellers, operating under
the premise that they can always come down in price, overprice their business. This
theory often "backfires," because buyers often will refuse to look at an overpriced
business. It has been shown that the amount of the down payment may be the key
ingredient to a quick sale. The lower the down payment, generally 40 percent of the
asking price or less, the shorter the time to a successful sale. A reasonable down
payment also tells a potential buyer that the seller has confidence in the business's ability
to make the payments.
Why is seller financing so important to the sale of my business?
Surveys have shown that a seller, who asks for all cash, receives on average only 70
percent of their asking price, while sellers who accept terms receive on average 86
percent of their asking price. That's a difference of 16 percent! In many cases,
businesses that are listed for all cash just don't sell. With reasonable terms, however, the
chances of selling increase dramatically and the time period from listing to sale greatly
decreases. Most sellers are unaware of how much interest they can receive by financing
the sale of their business. In some cases it can greatly increase the amount received.
And, again, it tells the buyer that the seller has enough confidence that the business can,
indeed, pay for itself.
What happens when there is a buyer for my business?
When a buyer is sufficiently interested in your business, he or she will, or should, submit
an offer in writing. This offer or proposal may have one or more contingencies. Usually,
they concern a detailed review of your financial records and may also include a review of
your lease arrangements, franchise agreement (if there is one), or other pertinent details
of the business. You may accept the terms of the offer or you may make a counter-
proposal. You should understand, however, that if you do not accept the buyer's
proposal, the buyer can withdraw it at any time.
At first review, you may not be pleased with a particular offer; however, it is important to
look at it carefully. It may be lacking in some areas, but it might also have some pluses to
seriously consider. There is an old adage that says, "The first offer is generally the best
one the seller will receive." This does not mean that you should accept the first, or any
offer -- just that all offers should be looked at carefully.
When you and the buyer are in agreement, both of you should work to satisfy and remove
the contingencies in the offer. It is important that you cooperate fully in this process. You
don't want the buyer to think that you are hiding anything. The buyer may, at this point,
bring in outside advisors to help them review the information. When all the conditions
have been met, final papers will be drawn and signed. Once the closing has been
completed, money will be distributed and the new owner will take possession of the
business.
What can I do to help sell my business?
A buyer will want up-to-date financial information. If you use accountants, you can work
with them on making current information available. If you are using an attorney, make sure
they are familiar with the business closing process and the laws of your particular state.
You might also ask if their schedule will allow them to participate in the closing on very
short notice. If you and the buyer want to close the sale quickly, usually within a few
weeks, unless there is an alcohol or other license involved that might delay things, you
don't want to wait until the attorney can make the time to prepare the documents or attend
the closing. Time is of the essence in any business sale transaction. The failure to close
on schedule permits the buyer to reconsider or make changes in the original proposal.
What can business brokers do - and, what can't they do?
Business brokers are the professionals who will facilitate the successful sale of your
business. It is important that you understand just what a professional business broker can
do -- as well as what they can't. They can help you decide how to price your business and
how to structure the sale so it makes sense for everyone -- you and the buyer. They can
find the right buyer for your business, work with you and the buyer in negotiating and
every other step of the way until the transaction is successfully closed. They can also help
the buyer in all the details of the business buying process.
A business broker is not, however, a magician who can sell an overpriced business. Most
businesses are saleable if priced and structured properly. You should understand that
only the marketplace can determine what a business will sell for. The amount of the down
payment you are willing to accept, along with the terms of the seller financing, can greatly
influence not only the ultimate selling price, but also the success of the sale itself.
Now that you've completed our selling tutorial, be sure to download visit our forms section
to download any forms you may need to move along the selling process.
Copyright 2007 Business Brokerage Press Contact Us
Who is the Buyer?
Buyers buy businesses for many of the same reasons that sellers sell businesses. It is
important that the buyer is as serious as the seller when it comes time to purchase a
business. If the buyer is not serious, the sale will never close. Here are just a few of the
reasons that buyers buy businesses:
• Laid-off, fired, being transferred (or about to be any of these)
• Early retirement (forced or not)
• Job dissatisfaction
• Desire for more control over their lives
• Desire to do his or her own thing
A Buyer Profile
Here is a look at the make-up of the average individual buyer looking to replace a lost job
or wanting to get out of an uncomfortable job situation. The chances are he is a male
(however, more and more women are going into business for themselves, so this is rapidly
changing). Almost 50 percent will have less than $100,000 in which to invest in the
purchase of a business. In many cases the funds, or part of them, will come from personal
savings followed by financial assistance from family members. The buyer will never have
owned a business before, and most likely will buy a business he or she had never
considered until being introduced to it.
Their primary reason for going into business is to get out of their present situation, be it
unemployment or job disagreement (or discouragement). The prospective buyer wants to
do their own thing, be in charge of their own destiny, and they don't want to work for
anyone. Money is important, but it's not at the top of the list; in fact, it probably is in fourth
or fifth place in the overall list. In order to pursue the dream of owning one's own
business, the buyer must be able to make that "leap of faith" necessary to take the risk of
purchasing and operating their own business.
Buyers who want to go into business strictly for the money usually are not realistic buyers
for small businesses. Keep in mind the following traits of a willing buyer:
* The desire to buy a business
* The need and urgency to buy a business
* The financial resources
* The ability to make his or her own decisions
* Reasonable expectations of what business ownership can do for him or her
What Do Buyers Want to Know?
This may be a bit premature since you may not have decided to sell, but it may help in
your decision making process to understand not only who the buyer is, but also what he
or she will want to know in order to buy your business. Here are some questions that you
might be asked - and, should be prepared to answer:
* How much money is required to buy the business?
* What is the annual increase in sales?
* How much is the inventory?
* What is the debt?
* Will the seller train and stay on for awhile?
* What makes the business different/special/unique?
* What further defines the product or service? Bid work? Repeat business?
* What can be done to grow the business?
* What can the buyer do to add value?
* What is the profit picture in bad times as well as good?
Copyright 2007 Business Brokerage Press
A Few Things to Consider
Buyers Want Cash Flow
The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit
down with your accountant or bookkeeper and begin to get your financial statements in
order, with cash flow the order of business. Cash flow is not the same thing as profit. Most
buyers look at the profit and loss statement or tax return, as well as owner or family
compensation. They will consider any excess compensation to employees and family.
Buyers will also look at large, one-time expenses such as a new computer system or
remodeling. They will consider non-cash items like depreciation
and amortization. Interest expenses will be reviewed, as will owner prerequisites. These
are items that a professional business broker considers when advising a selling client on
a selling price.
*Insider Tip
What about the Internet? The Internet is a real "buzz" word - and if its use is appropriate
for your business, then developing a web site is important not only to your on-going
business, but also to a buyer. Many buyers are conscious of what the Internet is doing for
many businesses. If you have a web site for your business, it could be a big plus.
Appearances Do Count
The time to replace that old worn-out piece of equipment is before you decide to sell.
Don't assume that a new owner will want to do it or that the price will be slightly lower
because you haven't replaced it. The time to "spiff up" the business is now, even if you
aren't selling. Fix the sign, replace the carpet, paint the place - make it look good. Even if
you're not selling, it's just plain good for business, and you never know when the time to
sell occurs. Keep-in-mind that anything that increases sales also increases profits and the
all-important cash flow!
Everything Has Value
There are other things that add value to your business. Don't discount the value of
customer lists, proprietary products and/or techniques, well-maintained equipment, secret
recipes, customized software programs, or good employees. These are termed "off-
balance sheet items," and although not used in most pricing models, they add to value.
Look at your business very carefully so you don't overlook those items that make your
business more attractive to the buyer.
Eliminate the Surprises
Long before you put your business on the market eliminate the surprises! Review every
facet of the business and remedy any problems that could appear during the sale
process. No one likes surprises - most of all potential buyers. Whether legal, accounting,
environmental, or anything else - solve it now.
*Insider Tip
This may sound like something that should have been done when the business first
started, so it may be "after-the-fact". You should create an operations manual. You may
already have ,started one years ago, or simply, have thought of doing one. Now is the
time. It may actually create added value to the business. Even if it doesn't, it will impress
buyers that you have your business "act" together and should help you sell more quickly
and effectively. Preparing a manual on how to operate your business can also be helpful
even if you don't want to sell. It doesn't have to be elaborate, just cover the basics. A
collection of ads that you have placed a catalog or sample of products, publications, or
menus (if the business is food related) is also impressive. Include anything to do with the
business that might be helpful for a new owner. However, don't include anything that is
proprietary, such as customer lists, suppliers or secret recipes, etc.
Copyright 2007 Business Brokerage Press
You Can Help!
We look forward to working with you in finding a suitable buyer for your business. You, as
the seller, are an integral part of the total marketing program. We would like to offer a few
friendly recommendations that will help in our marketing efforts. We have checked those
items that we think will be especially applicable to your type of business.
It might also be helpful if you took a good look at your business from the perspective of a
buyer. Try to put yourself in the place of a prospective purchaser of the business. What
would you do to make it more attractive or more saleable? Obviously, the financial records
of your business are critical to the sale of your business, but how it looks is also
important. First impressions really count! If a potential buyer doesn't like the appearance
of your business, the rest of it may never get a chance. If you have any questions, please
don't hesitate to call us. It's only by working together that we'll get the best results.
You might want to check the following to see if any of them are applicable:
* Keep normal operating hours. There may be a tendency to "let down" when you put your
business up for sale. However, it's important that prospective buyers see your business at
its best.
* Repair signs, replace outside lights, etc. You don't want your business to look as if it has
been neglected.
* Maintain inventory at a constant level. If you let your inventory slide, your business will
look neglected. If anything, increase it so your business will look busy.
* Remove items that are not included in the sale and unnecessary items, especially if
inoperative.
* Repair non-operating equipment or remove it if you are not using it.
* Tidy-up outside premises.
* Spruce-up the inside of the business.
Copyright 2007 Business Brokerage Press
Common Seller Questions
How long does it take to sell my business?
It generally takes, on average, between five to eight months to sell most businesses. Keep
in mind that an average is just that. Some businesses will take longer to sell, while others
will sell in a shorter period of time. The sooner you have all the information needed to
begin the marketing process, the shorter the time period should be. It is also important
that the business be priced properly right from the start. Some sellers, operating under
the premise that they can always come down in price, overprice their business. This
theory often "backfires," because buyers often will refuse to look at an overpriced
business. It has been shown that the amount of the down payment may be the key
ingredient to a quick sale. The lower the down payment, generally 40 percent of the
asking price or less, the shorter the time to a successful sale. A reasonable down
payment also tells a potential buyer that the seller has confidence in the business's ability
to make the payments.
Why is seller financing so important to the sale of my business?
Surveys have shown that a seller, who asks for all cash, receives on average only 70
percent of their asking price, while sellers who accept terms receive on average 86
percent of their asking price. That's a difference of 16 percent! In many cases,
businesses that are listed for all cash just don't sell. With reasonable terms, however, the
chances of selling increase dramatically and the time period from listing to sale greatly
decreases. Most sellers are unaware of how much interest they can receive by financing
the sale of their business. In some cases it can greatly increase the amount received.
And, again, it tells the buyer that the seller has enough confidence that the business can,
indeed, pay for itself.
What happens when there is a buyer for my business?
When a buyer is sufficiently interested in your business, he or she will, or should, submit
an offer in writing. This offer or proposal may have one or more contingencies. Usually,
they concern a detailed review of your financial records and may also include a review of
your lease arrangements, franchise agreement (if there is one), or other pertinent details
of the business. You may accept the terms of the offer or you may make a counter-
proposal. You should understand, however, that if you do not accept the buyer's
proposal, the buyer can withdraw it at any time.
At first review, you may not be pleased with a particular offer; however, it is important to
look at it carefully. It may be lacking in some areas, but it might also have some pluses to
seriously consider. There is an old adage that says, "The first offer is generally the best
one the seller will receive." This does not mean that you should accept the first, or any
offer -- just that all offers should be looked at carefully.
When you and the buyer are in agreement, both of you should work to satisfy and remove
the contingencies in the offer. It is important that you cooperate fully in this process. You
don't want the buyer to think that you are hiding anything. The buyer may, at this point,
bring in outside advisors to help them review the information. When all the conditions
have been met, final papers will be drawn and signed. Once the closing has been
completed, money will be distributed and the new owner will take possession of the
business.
What can I do to help sell my business?
A buyer will want up-to-date financial information. If you use accountants, you can work
with them on making current information available. If you are using an attorney, make sure
they are familiar with the business closing process and the laws of your particular state.
You might also ask if their schedule will allow them to participate in the closing on very
short notice. If you and the buyer want to close the sale quickly, usually within a few
weeks, unless there is an alcohol or other license involved that might delay things, you
don't want to wait until the attorney can make the time to prepare the documents or attend
the closing. Time is of the essence in any business sale transaction. The failure to close
on schedule permits the buyer to reconsider or make changes in the original proposal.
What can business brokers do - and, what can't they do?
Business brokers are the professionals who will facilitate the successful sale of your
business. It is important that you understand just what a professional business broker can
do -- as well as what they can't. They can help you decide how to price your business and
how to structure the sale so it makes sense for everyone -- you and the buyer. They can
find the right buyer for your business, work with you and the buyer in negotiating and
every other step of the way until the transaction is successfully closed. They can also help
the buyer in all the details of the business buying process.
A business broker is not, however, a magician who can sell an overpriced business. Most
businesses are saleable if priced and structured properly. You should understand that
only the marketplace can determine what a business will sell for. The amount of the down
payment you are willing to accept, along with the terms of the seller financing, can greatly
influence not only the ultimate selling price, but also the success of the sale itself.
Now that you've completed our selling tutorial, be sure to download visit our forms section
to download any forms you may need to move along the selling process.
Copyright 2007 Business Brokerage Press Contact Us