Selling a Business Articles Archive - South Florida Business Broker Russell Cohen

Business Broker Russell Cohen

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Selling a Business Articles Archive

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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... read more

Why Your Business Won’t Sell!

What are the odds of your business actually selling once you have made the decision to sell? Well, if the annual sales of your business are $750,000 or less, research indicates that the odds of your business selling are only 18 percent. If your annual sales are $750,000 to $2 million, your odds increase to 25 percent. If your annual sales volume is above $2 million, the odds increase to 30 + percent. Keep in mind that approximately 75 percent of all businesses have annual sales of less than $750,000. What does this all mean? To put it bluntly: if you are thinking of selling your business, you have about a one in five chance of it actually selling. This obviously begs the question: why are the odds so poor? One would think that if you put your business on the market, it should sell in a reasonable length of time. Here are some reasons why some businesses didn’t sell-as explained by various business brokers and intermediaries. They are excerpted from an article in INC magazine, April 2002. The business is no longer listed for sale. The cash flow was strong, but a lot of buyers thought that the deal was overpriced. Buyers were intrigued, but the economics of the deal wouldn’t make sense, and the seller wouldn’t negotiate. There was serious interest, but the owner got distracted by an arrangement with a friend to solicit offers. None came through. We almost had a deal, but financing was impossible to find. We had three offers, including an accepted bid for $4 million, but the buyer couldn’t get financing. The... read more

Why Sell Your Company

Selling one’s business can be a traumatic and emotional event. In fact, “seller’s remorse” is one of the major reasons that deals don’t close. The business may have been in the family for generations. The owner may have built it from scratch or bought it and made it very successful. However, there are times when selling is the best course to take. Here are a few of them. Burnout – This is a major reason, according to industry experts, why owners consider selling their business. The long hours and 7-day workweeks can take their toll. In other cases, the business may just become boring – the challenge gone. Losing interest in one’s business usually indicates that it is time to sell. No one to take over – Sons and daughters can be disenchanted with the family business by the time it’s their turn to take over. Family members often wish to move on to their own lives and careers. Personal problems – Events such as illness, divorce, and partnership issues do occur and many times force the sale of a company. Unfortunately, one cannot predict such events, and too many times, a forced sale does not bring maximum value. Proper planning and documentation can preclude an emergency sale. Cashing-out – Many company owners have much of their personal net worth invested in their business. This can present a lack of liquidity. Other than borrowing against the assets of the business, an owner’s only option is to sell it. They have spent years building, and now it’s time to cash-in. Outside pressure – Successful businesses create competition. It may be... read more

Why Sales of Businesses Fall Apart

There are three main players involved in the sale of a business, plus one other factor – that could be termed “the hand of fate.” The players directly involved are: the sellers, the buyers and the third parties. Each one of these has an important role in the successful closing of the sale of a privately held business. Conversely, each one can directly contribute to the deal not closing at all. Although in many cases there can be a combination of two or more, usually one side is the main contributor, or, at least, starts the ball rolling uphill. Here are the primary reasons why deals end up not closing and then how the “fickle hand of fate” can also have a negative impact on the deal. Sellers Many times, sellers are not really committed to selling the business. Although it may have sounded like a good idea at the time, or they may suddenly realize that they won’t have a thing to do if it sells, or they discover that the marketplace will not pay them what they think their business is worth. A seller who is committed to selling will be willing to overcome the complexities necessary for closing the sale. In some cases, a seller may not reveal a problem, or may not think it is not important enough to reveal. Buyers, like most people, do not like surprises. Sellers must understand that only by openly discussing all issues about the business can a sale close successfully. Sellers should consult their outside advisors prior to putting their business on the market. Sellers must understand that their... read more

Who Is The Buyer?

Buyers buy a business 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 them) 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, 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... read more

Why Seller Financing?

Many business owners would like to receive all-cash for their business when selling. And yet they are often told that this is really not possible. Why? Most people are accustomed to financing just about everything – home, car, vacation home, even college for their children. The first question business brokers are often asked is, How much money will I have to invest to buy that business? Seller financing is usually necessary because of the lack of outside financing available. Certainly, some is available, but less than 90 percent of small business sales receive outside financing when selling. If you are selling you may be one of the few lucky ones, but the business better be absolutely perfect. If a seller is not willing to finance the sale, many buyers suspect a problem. After all, a business should be able to pay for itself and provide a reasonable income for a buyer. A buyer then wants to know what is wrong with the business that the seller wants all cash? Aside from this, even if a buyer has all of the necessary funds, he or she may want to spend their money on improving the business, adding equipment, building inventory, or just keep it for working capital. Another similar issue that is raised by sellers is that, if they are willing to finance the sale, they want some outside collateral to secure the loan on their business. They want to make sure that they get all of their money – with no risk. Buyers are very sensitive about this issue. Again, they raise the point about the business being able... read more

When Selling Your Business: Confidentiality Is Key

You’ve make the big decision to sell. Your books are in order, you’ve spiffed up the premises. What are you waiting for? Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker? Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following: 1. Qualify the buyer. Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters. 2. Use appropriate marketing strategies. How can... read more

What Makes the Sale of a Business Fall Through

There are myriad reasons why the sale of a business doesn’t close successfully; these multiple causes can, however, be broken down into four categories: those caused by the seller, those caused by the buyer, those that just happen (“acts of fate”), and those caused by third parties. The following examines the part each of these components can play in contributing to the wrecked deal: The Seller In some instances, the seller doesn’t have a valid reason for entering into the sale process. Without a strong reason for selling, he or she has neither the willingness to negotiate nor the flexibility to see the sale to a conclusion. Without such a commitment, the desire to sell is not powerful enough to overcome the many complexities necessary to finalize the sales process. Some sellers are merely testing the waters. As detailed above, they are not at that “hungry” stage that provides the push toward a successful transaction. These sellers merely want to see if anyone wants to buy their business at the price they would like to receive. Many sellers are unrealistic about the price they want for their business. They may be sincere about wanting to sell, but they are unable to be realistic about how the marketplace will value the business. The demand for their business may not be there. Some sellers fail to be honest about their business or its situation. They may be hiding the fact that new competition is entering the market, that the business has serious problems or some other reason the business is not salable under existing circumstances. Even worse, some sellers do not... read more

When Selling Your Business, Play To Win

If you are an independent business owner, you are most likely also an independent business seller–if not now, you will be somewhere down the road. The Small Business Administration reports that three to five years is a long enough stretch for many business owners and that one in every three plans to sell, many of them right from the outset. With fewer cases of a business being passed on to future generations, selling has become a fact of independent business life. No matter at what stage your own business life may be, prepare now to stay ahead in the selling game. Perhaps one of the most important rules of the selling game is learning how not to “sell.” An apt anecdote from Cary Reich’s The Life of Nelson Rockefeller shows a pro at work doing (or not doing) just that: When the indomitable J.P. Morgan was seeking the Rockefeller’s Mesabi iron ore properties to complete his assemblage of what was to become U.S. Steel, it was Junior [John D. Rockefeller, Jr.] who went head-to-head with the financier. “Well, what’s your price?” Morgan demanded, to which Junior coolly replied, “I think there must be some mistake. I did not come here to sell. I understand you wished to buy.” Morgan ended up with the properties, but at a steep cost. As this anecdote shows, the best approach to succeeding at the selling game is to be less of a “seller” and more of a “player.” Take a look at these tips for keeping the score in your favor: Let Others Do the Heavy Pitching Selling a business is an intense... read more

What Every Seller Should Know

Selling your business is a major decision! You have devoted your time, money and energy to building, running and operating your business. It may well represent your life’s work. You have decided that now is the right time to sell, and you want the very best professional guidance you can get. This is when working in tandem with a professional business broker can make the difference between just getting rid of the business and selling it for the very best price and terms. Following are some of the most common questions asked by sellers — and if you are contemplating selling your business, these are questions you should be asking, too. 1. What Can — and Can’t — A Business Broker Do for Me? Business brokers are the professionals who will facilitate the successful sale of your business. It is important that you understand just what professional business brokers can do — as well as what they can’t. Business brokers can help you decide how to price your business and how to structure the sale so it makes sense for you and the buyer. They can find the right buyer for your business, work with the seller and the buyer in negotiating, and coordinate every step of the way until the transaction is successfully closed. They will also help the buyer with all details of the business buying process. A business broker is not, however, a magician who can sell an overpriced business. Most businesses are salable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount... read more
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