Small Businesses for Sale
Key Considerations in Selling your Small Business
- What Kind of Offer Can I Expect?
- What Do Buyers Look For?
- How Do I Prepare My Business For Sale?
What Kind of Offer Can I Expect?
Most small businesses sell for between 80%-100% of the asking price, with a few selling for greater than the asking price. You can get the highest price in the shortest timeframe by offering Seller financing for up 80% of the purchase price. Doing so also shows the buyer you have confidence in the future of your business. However, over 50% of the small businesses for sale Alpine has sold, sold for 100% cash to the seller. This is because Alpine is the only business brokerage in the state that actively assists the Buyer in preparing and submitting bank applications, business plans and projections at no cost to the buyer. Not every business is “Bankable.” When you meet with one of our associates, discuss with them the options you have given the unique nature of your business.
The offer will more than likely have several contingencies for such things as verification of accounts and records, transferability of the lease, and verification and release of liens. You should expect a training period to assist the new owner as well as a non-compete agreement for a period of time. Alpine Business Brokers will help you understand all offers and help you remove the contingencies.
What Do Buyers Look For in a Small Business?
Most buyers look for the following factors:
Provable Books and Records
A buyer’s offer and future cash flows depend on the accuracy and honesty of your records. Buyers look to prove that your historical numbers accurately reflect your business.
Reasonable Price and Terms
Ultimately, buyers of small businesses for sale are looking for three things from the future cash flows of the business they are buying: (1) an adequate living wage, given the required skills and experience of the owner, (2) the ability to make the debt payments, and (3) a reasonable return on the money they are investing. Generally, if the selling price supports these three elements, you’ll have a successful sale.
Buyers do not generally want to pay 100% cash. They expect to pay 20% to 30% down and to finance the balance, either from the Seller or through a bank. Sellers can carry back a portion of the sales price to show the buyer they have confidence in the business and generally will receive a higher price and sell their business quicker than Sellers that ask 100% cash. Alpine is the only brokerage in the state that actively assists buyers in securing bank financing for a majority of our deals, enabling us to reach more buyers for your business and you to cash out completely, should that be your choice.
Furniture, Fixtures, and Equipment
A buyer expects to get all the assets needed to sustain the business, in good working order and unencumbered.
Lease, Training, and Non-Compete
The new buyer usually expects to continue the business in its present location and must be able to assume or sign a new lease with the landlord. The buyer will expect you to provide training and consulting for a period of time and to sign a reasonable non-compete agreement.
A buyer seeks to understand the reason an owner is selling as a way to discover any “landmine’s” and to be sure that the owner is not hiding anything.
Time Is of the Essence
A serious buyer wants to move as quickly as possible, so you must respond to the buyer in a timely fashion. Once an offer has been accepted, it is key to work with all due haste to remove the contingencies, provide needed information, and move to complete the transaction.
We can help the buyer deal with almost any situation, as long as it is disclosed up front. Surprises—not bad news—kill deals. Surprises raise questions in the buyer’s mind and destroys trust. Disclosure up front establishes a relationship of trust and honesty. Don’t hide key facts from your broker or buyer. Some typical surprises that have killed deals include; financial statements that are unsupported by actual tax returns, unpaid taxes, hostile landlords, poor leases, unpaid and undisclosed loans, zoning changes, loss of key employees, and health and safety issues. Disclose! Disclose! Disclose!
How Do I Prepare My Small Business For Sale?
When preparing your business for sale, do—
- Keep good records
- Allow sufficient time for the sale
- Accept terms
- Disclose, disclose, disclose
- Use a knowledgeable business broker
- Seek legal and accounting advice
- Ensure key employees will continue
- Continue to operate and grow your business
- Plan to train the new owner
- Plan to sign a non-compete agreement
At the same time, don’t—
- Underestimate the value of your business
- Wait too long
- Be rigid on terms
- Stop growing your business