Frequently asked questions

posted on 18 August 2020
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Expert broker de afaceri - Adrian Țepeluș
Adrian Țepeluș
Brașov - Romania
+40 726 308 904
adrian.tepelus@trade-x.ro

This article answers a few common questions a seller might have when he decides to sell his business.

How Long Does It Take to Sell My Business?

Selling most businesses generally takes, on average, between 2 to 6 months. 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 waiting time should be. It is also important that the business is priced properly right from the start. Some sellers, operating under the premise that they can always lower the price, overprice their business. This theory usually backfires, because buyers will often refuse to look into an overpriced business. It has been shown that the amount of the down payment may be the key ingredient for a quick sale. The lower the down payment, generally 40% 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 sellers who ask for an all cash transaction receive on average only 70% of their asking price, while those who accept deferred payments receive on average 86% of their asking price. That’s a difference of 16%! In many cases, businesses that are listed for all cash just don’t sell. Within 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 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 agreements, franchise agreement (if there is one), or other pertinent details of the business. You may accept the terms of the offer, or you can make a counter-proposal. You should understand, however, that if you do not accept the buyer’s proposal, it can be withdrawn at any time. At first, you may not be pleased with a particular offer; however, it is important to carefully look at it. It may be lacking in some areas, but there might also be some plus sides to seriously consider. There is an old saying which states that “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 towards a satisfying agreement and remove the contingencies in the offer. It is important that you fully cooperate 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 advisers to help him 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 collaborate with your accountant, they can help making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws. You might also ask if their schedule will allow them to participate in the closing on very short notice. You and the buyer will want to close the sale quickly, usually within a few weeks. Time is of essence in any business sale transaction. The failure to close on schedule allows the buyer to reconsider or make changes to 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 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 prospective buyer. They can find the right buyer for your business, work with both of you in the negotiating stage and be there every step of the way, until the transaction is successfully closed. They can also help the buyer navigate through all details of the business buying process. A business broker is not, however, a magician who can sell an overpriced business. Most businesses are marketable 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.

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