Business Q & A

The best time to sell is when a business is doing well. It's best not to wait until after a business has peaked; the selling price can suffer. However, almost any business can be sold, even if it is not doing too well, if the sale is handled properly and priced correctly.

A company's value depends on many factors such as industry type, cash flow, asset values, financial history, condition of equipment and premises, favorable lease terms, competition, location, and the economy. By analyzing your business and comparable sales in your industry, the proper pricing strategy for your business can be determined.

When the business sells, the commission is paid at closing. Most sellers have found that the cost of using our services is more than offset by the value they have gained from our sales expertise and wide access to motivated buyers.

Most owners find that the frustration, expense and time involved do not yield cost savings. In fact, because they don't have access to a large number of qualified buyers, many owners end up selling their business for much less than they could have by working with a well-established business broker. Plus, owners find it difficult to work directly with buyers while maintaining confidentiality. Selling a business is a specialized function. Seek professional assistance when it comes to selling an asset as valuable as your business.

The failure rate in new small business is largely in the start-up phase. There are several reasons to buy an existing business: Actual results rather than pro-forma show, immediate cash flow, trained employees in place, established suppliers and credit experience, also established customers and name recognition. Training by the seller, with the possibility of owner financing, is also very important. These last two are important considerations. Finding someone who will teach you the intricacies of running a business and who is also willing to finance the sale can make all the difference.

Unlike the sale of real estate or new franchises, the sale of an ongoing business is very confidential for both the seller and the buyer. You will be asked to sign a non-disclosure agreement before any detailed information about a specific business is given to you. Meetings are confidential and may be held after normal business hours. This protects the business you may purchase by preserving the customers, suppliers and employees for the seamless transfer of the business to you. All inquires are held in strict confidence.

The amount of down payment varies depending on the type of business, the amount of hard assets included, the seller's situation and your liquidity. Buying a business is actually very down payment driven. Naturally the amount of money you have for down payment determines the size business you can purchase. Typically, the more cash down you can offer a seller the lower the total sale price of the business. Your Broker will discuss with you the level of cash investment you will be comfortable with. Your Broker will explain to you that you should not totally commit all of your available liquid assets because of the importance of operating cash after you take over the business. Knowing your comfort level of cash investment is the most important information that your Broker needs to know to match you with the right business.

There have been many surveys taken in an attempt to answer this question. Most surveys reveal the same responses, in almost the same identical order of priority. Here are the results of a typical survey, listed in order of importance:

1. To do my own thing, control my own destiny.
2. Don't want to work for someone else.
3. To better utilize my skills and abilities.
4. To make money.

It is interesting to note that money is not at the top of the list, but comes in fourth.

This is a common belief, but a belief that is not usually correct. The vast majority of businesses for sale are being sold for human reasons rather than financial ones. Human reasons include health problems, change in the owner's family situation, divorce, desire to do something else, relocation, retirement, or just plain burnout. Generally speaking, a business does not survive for several years if it is losing money consistently. However, most business owners will take advantage of every opportunity to reduce the income taxes that the business must pay on profits. Therefore, it is necessary to determine the true owners benefit to fully understand the financial health of the business.

Some of the advantages of buying a franchise are:

• Known name means instant recognition of a proven product or service.
• Ongoing support means you are in business for yourself, not by yourself.
• Better than 85% of franchises are successful
• Operating systems are in place, with systems that have been proven, and worked out for you.
• Opportunity to add additional locations within the franchise system.
• Training by the franchiser for you and your employees.
• The availability of a financing program established by the franchiser.

It may be advisable to have an attorney review the legal documents. It is important, however, that the attorney you hire is familiar with the business buying process and has the time available to handle the paperwork on a timely basis. If the attorney does not have experience in handling business sales, you may be paying for the attorney's education. Most business brokers have lists of attorneys who are familiar with the business buying process. An experienced attorney can be of real assistance in making sure that all of the details are handled properly. Business brokers are not qualified to give legal advice. However, keep in mind the fact that many attorneys are not qualified to give business advice. Your attorney will be, looking after your interests; however, you need to remember that the seller's interests must also be considered. If the attorney goes too far in trying to protect your interests, the seller's attorney will instruct his or her client not to proceed. The transaction must be fair for all parties.

If you know someone who has owned their own business for a period of time, he or she may also be a valuable resource in answering your questions about how small business really works.

You have to make the final decision though. That "leap of faith" between looking and actually being in business for yourself is a step that only you can make!

A professional business broker can be helpful in many ways. They can provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own. Approximately 90 percent of those who buy businesses end up with something completely different from the business that they first inquired about. Business brokers can offer you a wide variety of businesses to look at and consider.

Business brokers are also an excellent source of information about small business and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business broker will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting other professionals who may be able to assist you.

Your local professional business broker is the best person to talk to about your business needs and requirements.