10 Things

Most business owners will spend years building up their business. When it comes time to sell they need to get the most from their hard work. Here are some things to consider when it's time to sell your business. 1) Most businesses put on the market don't sell. Only about 20% sell. The problems relate to the business itself- is it profitable, well run, in a good industry are common concerns. Another big contributor is the owner. Is the owner asking too much for the business, is he driving away potential buyers because s/he is the only one able to run such a specialized/complex/unique business? 2) It takes a long time to sell a business. Some sell in a couple of months, most take longer. The average is about a year. Be patient. 3) The seller will need to finance the sale of the business. Even if the business is sold via an SBA guaranteed loan, increasingly they want to see some element of seller financing also. It occasionally happens that the sale is all cash. You can improve the odds of that by making the business a great deal. 4) Pricing your business is part art and part science. If you get more than one valuation, you will get different numbers. If you look at all the different businesses and take an average for mainstreet businesses they sell for 2.1 times the seller's discretionary cash flow. This varies by industry, of course, and a bunch of other variables. Most business brokers will perform a valuation as part of their listing service for mainstreet businesses. 5) The type of buyer will make a significant difference in the price they're willing to pay. Inexperienced buyers may pay more than someone with industry experience. 6) The landlord can stop the sale by not approving a new owner. You should spend some time warming up the landlord to the idea that you want to sell. Most buyers will want market lease rates and a long lease to make sure their investment in your business is secure. hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h hello24h 7) Banks will not typically finance the purchase of a business. They might finance the physical assets like machinery or equipment. Other lenders might lend on your accounts receivable. There are only two sources of loans for goodwill that I would suggest: the seller and an SBA loan if the business and buyer both qualify. 8) Business sales are like fashion. Internet sales are getting a lot of interest in 2010, but real estate, construction and related businesses are very difficult to sell until people have some confidence that the housing and construction markets are in recovery. 9) Only about 3% of people who say they are going to buy a business really do. This isn't a moral character issue, it is the fact that most people get overwhelmed with the risk of running a business. Most people can't tolerate the uncertainty and risk. 10) No surprises. Expect that you must show the faults of your business, all businesses have some issues. If the buyer finds something in due diligence that wasn't previously disclosed, the trust is gone, and the buyer flees. If you let the buyer know the problems, they can then decide if they have the skills and resources to address the issues, and will give them confidence to proceed. Of course, using a qualified business broker can help the process along, and help guide you and the prospective buyers through the many issues that arise. You need to focus on running your business, not selling your business. Many businesses have suffered because sales fell off as the owner tried to sell the business and neglected the day-to-day operation of their business. Don't fall into that trap. Erik Ottem is a business broker in Silicon Valley. He is a certified business intermediary and holds a master of business administration from Washington University in St. Louis.