Business Brokers in Raleigh Expansion

Business Brokers in Raleigh Expansion

TM Business Brokers announces its’ latest new office facilities in Raleigh, NC.  The new location expands the company’s geographical service area, and is designed to accommodate our fast-growing business brokerage operations by helping business owners sell a business and buyers purchase a business not only in the Raleigh, Durham and Chapel Hill areas but also in Greensboro, NC.  As business brokers in Raleigh, our primary goal is to help the business owner sell your business for more money confidentially.

Our growth over the past couple of years has been right on plan and we’ve been able to recruit top talent.  This new office will allow us to maintain our steady growth and serve our customers even better.  The new office will serve as our anchor location in North Carolina and support our continued growth expansion plans in the North Carolina market.

TM Business Brokers new Raleigh address is 11028 Fair Chase Court, Suite 2A, Raleigh, NC  27617.  The telephone number is 919-999-2400 and fax number is 919-999-2401.

Pittsburgh Business Brokers – New Hire

Pittsburgh Business Brokers – New Hire

TM Business Brokers, LLC announces the recent hiring of Jim Livingstone.  With Jim joining our team of Pittsburgh Business Brokers, he brings over 25 years of business experience working with small to mid-sized companies, both as an advisor and as an owner.

He has extensive experience in accounting, tax, business valuation and due diligence.  Jim has worked in a variety of industries, including retail, distribution, manufacturing, consumer products and service-oriented businesses.

Jim is a graduate of Syracuse University.  He is a CPA and has also attained the Accredited in Business Valuation designation issued by the AICPA.

We are excited to have Jim on our Pittsburgh Business Brokers team!

Sell a Business – Tasks to Do

Sell a Business – Tasks to Do

Before you sell a business or decide to go to market, owners should consider completing the following items:

  • Remove any items not included in the sale of the business.  That family heirloom portrait behind the counter of Grandfather Smith, founder of the business, should be removed.
  • Remove or repair any non-functioning equipment.
  • Prepare an operations manual to show a new owner all the functions of the business, how things are done, the major customers and suppliers, samples of advertising, and any other information that would help a new owner manage and operate the business.
  • Take care of any outstanding bills and resolve any legal, tax, or governmental issues.
  • Bring your financial statements up to date, and have your accounting professional prepare them for a buyer’s inspection.
  • Clean up the business inside and out.  Fill the shelves, clean up the inventory, and paint the interior if necessary.

No one likes surprises, most of all, prospective buyers.  Review every facet of your business and remedy any problems, whether legal, financial, governmental, etc., prior to placing your business up for sale.

Your professional Pittsburgh Business Brokers – TM Business Brokers can assist in all facets of preparation.  We know what buyers are looking for and are also familiar with current market conditions.

Pittsburgh Business for Sale – Buyers Look For?

Pittsburgh Business for Sale – Buyers Look For?
 

Your Pittsburgh business for sale is just what the buyer has been looking for.  The buyer has reviewed your financial statements and has made an offer contingent on several items.  You’ve reviewed the offer and it looks fine, so what’s next?  The contingencies in the deal mean that the buyer or his or her advisors have some concerns.  In larger deals, this process might be called due diligence.  However, in the smaller Pittsburgh business for sale scenario, the items of concern are usually spelled out as opposed to a general review of everything.  The reason for this is that larger companies have a lot more areas of concern than the typical smaller Pittsburgh business for sale.

Most contingencies concern the review of financial statements and/or business tax returns.  Others may involve lease issues, the seller staying on for a set period of time, or some very specific issue such as repaving the parking lot, if the landlord will not or is not required to.

Unfortunately, some contingencies may be hiding other ones such as a list of fixtures and equipment included in the sale.  Sounds easy on the surface, but the seller forgot that two pieces of equipment currently not in use need repair or the walnut desk in the office belongs to their Grandfather and is not included.  Or, while reviewing the lease, the buyer discovers that the landlord requires that the business must close by 6:00 PM or some other restriction applies and was not disclosed.  Deals have fallen apart over similar issues.

Most contingency problems can be resolved prior to the business being placed on the market.  The seller should do all of the following:

•    Check the status of all furniture, fixtures and equipment (FF&E).  Remove any FF&E that are not included in the sale or not in use –  or make repairs.

•    Review all contracts such as the building lease and equipment leases that will be assumed by the buyer.  Make sure there aren’t “problems” in them.  If there are, disclose them to a potential buyer out front – and be sure your Pittsburgh Business Brokers – TM Business Brokers are also aware of them.

•    Be prepared to answer questions such as:

– Are there any environmental, governmental or legal issues?
– How long will you be willing to stay and work with a new buyer – at no cost?
– Will the employees stay?
– Why was last year the worst one in years?
– Why was last year the best one in years?

The list can go on and on, but sellers need to be ready.  Buyers don’t like surprises.  Pittsburgh Business Brokers – TM Business Brokers know the process like a book.  We can be invaluable in preparing the business for the marketplace.

Pittsburgh Business Brokers – Why use Us?

Why use Pittsburgh Business Brokers – TM Business Brokers?

When you make the decision to sell your business, you are taking a giant step that involves the emotions as well as the marketplace, each with its own set of complexities.  Those sellers who are tempted to undertake the sale of a business on their own should understand both the process and the emotional environment that this process is set against.  The steps outlined below are just some of the items for a successful sale.  While these might seem daunting to the do-it-yourself business owner, by engaging the help of the Pittsburgh Business Brokers – TM business brokers, the seller can feel confident about what is often one of the major decisions of a lifetime.

1.  Set the stage.
What kind of impression will the business make on prospective buyers?  The seller may be happy with a weathered sign (the rustic look) or weeds poking up through the pavement (the natural look), but the buyer might only think, “What a mess!”  Equally problematic can be improvements planned by the seller that appeal to his or her sense of aesthetics but that will, in fact, do nothing to benefit the sale.  Instead of guessing what might make a difference and what might not, sellers would be wise to seek the advice of Pittsburgh Business Brokers – TM Business Brokers – professionals with experience in dealing regularly with buyers and with an eye experienced in properly setting the business scene.

2.  Get the records straight.
Although outward appearance does count, what’s inside the books is even more important.  Ultimately, a business will sell according to the numbers. TM Business Brokers can offer the seller invaluable assistance in the presentation of the financials.

3.  Weigh price against value.
All sellers naturally want to get the best possible price for their business.  However, they also need to be realistic.  To determine the best price, TM Business Brokers will use industry-tested pricing techniques that include ratios based on sales of similar businesses, as well as historical data on the type of business for sale.

4.  Market professionally.
Engaging the services TM Business Brokers is the key to the successful sale of a business.  We will prepare a marketing strategy and offer advice about essential marketing tools–everything from a business description to media advertising.  Through our professional networks and access to data on prospective buyers, we get the word out about the business far more effectively than any owner could manage on an individual basis.

Sell My Business – Am I Serious?

Sell my business – am I serious?

There are three good questions to consider before selling your business.

First, “Do I really want to sell my business?”  If you’re really serious about selling your business and have a solid reason (or reasons) why you want to sell, it will most likely happen.

Second, “Do I have reasonable expectations?”  You increase your chances of selling if you can answer “yes” to this second question.  This includes your expectations about the selling price, the time it will take to sell your business, and the amount of seller financing you are willing to offer.

Third, “What will I do once I sell my business?”  The time to consider this is before you place your business on the market.  This may seem obvious, but many transactions fall through because the business owner did not consider what he or she would do once the business was sold.

A “yes” answer to the first two questions plus having an answer to the third question (other than “I don’t know”) means you are serious about selling.

Sale of a Business in Pittsburgh – Now a Good Time?

Timing is everything.  Are you considering the sale of a business in Pittsburgh?  We have  pent up demand of buyers seeking businesses for sale in Pittsburgh!

Tips for a fast sale of a business in Pittsburgh

  • Have up-to-date financial information available
  • Prepare a current list of fixtures & equipment
  • Maintain normal business hours
  • Spiff up the business
  • Set a realistic price
  • Be willing to negotiate
  • Gather all of the information a buyer might like to review

Here are two major ways to increase the odds of a successful sale of a business in Pittsburgh:

  • Make sure that you are serious before you put your business up for sale.  You should be willing to accept, within reason, what the marketplace is willing to pay.  It’s not what you want for your business, or what your accountant says it’s worth – it’s what a buyer is willing to pay.  Find out if the price you are asking is in the “ballpark” before you go to market.  TM Business Brokers is a good place to start.  We can tell you what you might expect to receive if you sell now.
  • Be willing to finance a portion of the sale of a business.  Counting on the business selling for all cash or assuming that the business can be financed will most likely make your business one of the four that doesn’t sell.  By showing your willingness to assist in the financing, you reassure the buyer that you have confidence in the businesses’ ability to finance itself.  Also, keep in mind that by helping in financing the business you will be entitled to interest on the balance, thereby increasing the price you will receive.

The Perfect Business

The “perfect business”, the one that would be sure to sell, has the following attributes:

  • a reasonable price
  • a reasonable down payment
  • seller financing
  • reasonable sales (hopefully steady or increasing each year)
  • a compelling reason for sale
  • a desired or popular industry type
  • attractive and strategic location (if important for business type)

Following these guidelines and tips might not sell your business, but it will certainly increase the odds.  Almost any business will sell under the right circumstances.  If you are serious about selling, the first step should be to call TM Business Brokers.  We can answer your questions about the selling process and what it takes to sell your business in today’s economic climate.

Rating Today's Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex. The following are some of today’s most active categories of business buyers:

Family Members

Members of the seller’s own family form a traditional category of business buyer: tried but not always “true.” The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the “heir to the throne.” If this has been done, the family member may be the best type of buyer.

Too often, however, the difficulty with the family buyer category lies in the conflicts that may develop. For example, does the family member have sufficient cash to purchase the business? Can the selling family member really leave the business? In too many cases, these and other conflicts result in serious disruption to the business or to the sales transaction. The result, too often, is an “I-told-you-so” situation, where there are too many opinions, but no one is really ever the wiser. An outside buyer eliminates these often insoluble problems.

The key to deciding on a family member as a buyer is threefold: ability, family agreement, and financial worthiness.

Business Competitors

This is a category often overlooked as a source of prospective purchasers. The obvious concern is that competitors will take advantage of the knowledge that the business is for sale by attempting to lure away customers or clients. However, if the business is compatible, a competitor may be willing to “pay the price” to acquire a ready-made means to expand. A business brokerage professional can be of tremendous assistance in dealing with the competitor. They will use confidentiality agreements and will reveal the name of the business only after contacting the seller and qualifying the competitor.

The Foreign Buyer

Many foreigners arrive in the United States with ample funds and a great desire to share in the American Dream. Many also have difficulty obtaining jobs in their previous professions, because of language barriers, licensing, and specific experience. As owners of their own businesses, at least some of these problems can be short-circuited.

These buyers work hard and long and usually are very successful small business owners. However, their business acumen does not necessarily coincide with that of the seller (as would be the case with any inexperienced owner). Again, a business broker professional knows best how to approach these potential problems.

Important to note is that many small business owners think that foreign companies and independent buyers are willing to pay top dollar for the business. In fact, foreign companies are usually interested only in businesses or companies with sales in the millions.

Synergistic Buyers

These are buyers who feel that a particular business would compliment theirs and that combining the two would result in lower costs, new customers, and other advantages. Synergistic buyers are more likely to pay more than other types of buyers, because they can see the results of the purchase. Again, as with the foreign buyer, synergistic buyers seldom look at the small business, but they may find many mid-sized companies that meet their requirements.

Financial Buyers

This category of buyer comes with perhaps the longest list of criteria–and demands. These buyers want maximum leverage, but they also are the right category for the seller who wants to continue to manage his company after it is sold. Most financial buyers offer a lower purchase price than other types, but they do often make provision for what may be important to the seller other than the money–such as selection of key employees, location, and other issues.

For a business to be of interest to a financial buyer, the profits must be sufficient not only to support existing management, but also to provide a return to the owner.

Individual Buyer

When it comes time to sell, most owners of the small to mid-sized business gravitate toward this buyer. Many of these buyers are mature (aged 40 to 60) and have been well-seasoned in the corporate marketplace. Owning a business is a dream, and one many of them can well afford. The key to approaching this kind of buyer is to find out what it is they are really looking for.

The buyer who needs to replace a job is can be an excellent prospect. Although owning a business is more than a job, and the risks involved can frighten this kind of buyer, they do have the “hunger”–and the need. A further advantage is that this category of buyer comes with fewer “strings” and complications than many of the other types.

A Final Note

Sorting out the “right” buyer is best left to the professionals who have the experience necessary to decide who are the best prospects.

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 building to the point where it is easier to join it, than to fight it. A business may be standing still, while larger companies are moving in.
  • An offer from “out of the blue” – The business may not even be on the market, but someone or some other company may see an opportunity. An owner answers the telephone and the voice on the other end says, “We would like to buy your company.”

There are obviously many other reasons why businesses are sold. The paramount issue is that they should not be placed on the market if the owner or principals are not convinced it’s time. And consider an old law that says, “The time to prepare to sell is the day you start or take over the business.”

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 their 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 or job disagreement (or discouragement). Prospective buyers want 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 fact, it probably is in fourth or fifth place in the overall list. In order to pursue the dream of owning one’s own business, buyers must be able to make that “leap of faith” necessary to take the risk of purchasing and operating their own business.

Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses. Keep in mind the following traits of a willing buyer:

  • The desire to buy a business
  • The need and urgency to buy a business
  • The financial resources
  • The ability to make his or her own decisions
  • Reasonable expectations of what business ownership can do for him or her

What Do Buyers Want to Know?

This may be a bit premature since you may not have decided to sell, but it may help in your decision-making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked and should be prepared to answer:

  • How much money is required to buy the business?
  • What is the annual increase in sales?
  • How much is the inventory?
  • What is the debt?
  • Will the seller train and stay on for awhile?
  • What makes the business different/special/unique?
  • What further defines the product or service? Bid work? Repeat business?
  • What can be done to grow the business?
  • What can the buyer do to add value?
  • What is the profit picture in bad times as well as good?

Rating Today's Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex. The following are some of today’s most active categories of business buyers:

Family Members

Members of the seller’s own family form a traditional category of business buyer: tried but not always “true.” The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the “heir to the throne.” If this has been done, the family member may be the best type of buyer.

Too often, however, the difficulty with the family buyer category lies in the conflicts that may develop. For example, does the family member have sufficient cash to purchase the business? Can the selling family member really leave the business? In too many cases, these and other conflicts result in serious disruption to the business or to the sales transaction. The result, too often, is an “I-told-you-so” situation, where there are too many opinions, but no one is really ever the wiser. An outside buyer eliminates these often insoluble problems.

The key to deciding on a family member as a buyer is threefold: ability, family agreement, and financial worthiness.

Business Competitors

This is a category often overlooked as a source of prospective purchasers. The obvious concern is that competitors will take advantage of the knowledge that the business is for sale by attempting to lure away customers or clients. However, if the business is compatible, a competitor may be willing to “pay the price” to acquire a ready-made means to expand. A business brokerage professional can be of tremendous assistance in dealing with the competitor. They will use confidentiality agreements and will reveal the name of the business only after contacting the seller and qualifying the competitor.

The Foreign Buyer

Many foreigners arrive in the United States with ample funds and a great desire to share in the American Dream. Many also have difficulty obtaining jobs in their previous professions, because of language barriers, licensing, and specific experience. As owners of their own businesses, at least some of these problems can be short-circuited.

These buyers work hard and long and usually are very successful small business owners. However, their business acumen does not necessarily coincide with that of the seller (as would be the case with any inexperienced owner). Again, a business broker professional knows best how to approach these potential problems.

Important to note is that many small business owners think that foreign companies and independent buyers are willing to pay top dollar for the business. In fact, foreign companies are usually interested only in businesses or companies with sales in the millions.

Synergistic Buyers

These are buyers who feel that a particular business would compliment theirs and that combining the two would result in lower costs, new customers, and other advantages. Synergistic buyers are more likely to pay more than other types of buyers, because they can see the results of the purchase. Again, as with the foreign buyer, synergistic buyers seldom look at the small business, but they may find many mid-sized companies that meet their requirements.

Financial Buyers

This category of buyer comes with perhaps the longest list of criteria–and demands. These buyers want maximum leverage, but they also are the right category for the seller who wants to continue to manage his company after it is sold. Most financial buyers offer a lower purchase price than other types, but they do often make provision for what may be important to the seller other than the money–such as selection of key employees, location, and other issues.

For a business to be of interest to a financial buyer, the profits must be sufficient not only to support existing management, but also to provide a return to the owner.

Individual Buyer

When it comes time to sell, most owners of the small to mid-sized business gravitate toward this buyer. Many of these buyers are mature (aged 40 to 60) and have been well-seasoned in the corporate marketplace. Owning a business is a dream, and one many of them can well afford. The key to approaching this kind of buyer is to find out what it is they are really looking for.

The buyer who needs to replace a job is can be an excellent prospect. Although owning a business is more than a job, and the risks involved can frighten this kind of buyer, they do have the “hunger”–and the need. A further advantage is that this category of buyer comes with fewer “strings” and complications than many of the other types.

A Final Note

Sorting out the “right” buyer is best left to the professionals who have the experience necessary to decide who are the best prospects.

Today's Business Buyer: A Profile

Today’s independent business marketplace attracts a wide variety of buyers eager for a piece of ownership action. Buyers of small businesses are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit. This is the broadest possible look at the types of buyers out there. Business owners considering putting their business on the market should be aware of the finer “distinctions” among buyers, as well as what they are looking to buy, and why.

1. Individual Buyer
This is typically an individual with substantial financial resources and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both time and money. If these buyers do not have the amount of personal equity required for acquisition, they most likely will turn to family members or venture capital sources for financing. (Buyers and sellers should be aware that, in many cases, seller financing will be an essential element, benefitting both parties in the long run.)

Even when such sources are available, the individual buyer will hit a strong bottom line when it comes to price. Therefore, these buyers will usually limit themselves to transactions involving less than $1 million, cash.

2. Strategic Buyer
This buyer is almost always a company, having as its goal to enter new markets, to increase market share, to gain new technology, or to eliminate some element of competition. In essence, it is part of this buyer’s “strategy” (hence the name) to acquire other businesses as part of a long-term plan. Strategic buyers can be either in the same business as the company under consideration, or a competitor. Example: a bank in one part of a state purchases or merges with one in another part of the same state. The acquiring bank enters a new market and “eliminates” competition at the same time.

Strategic buyers will be looking chiefly at businesses with sales over $20 million, with a proprietary product and/or unique market share, and effective management both in place and willing to remain.

3. Synergistic Buyer
The synergistic category of buyer, like the strategic type, is usually a company. The difference is that, with this buyer, the acquisition or merger flows from the complementary nature of the purchasing company and the company for sale.

Synergy means that the joining of the two companies will produce more, or be worth more than just the sum of their parts. Example: a large real estate company purchases a mortgage company. It can now use its existing customers (those who buy homes) and offer them the mortgage funds to finance their purchases. The benefits of this type of acquisition help both companies be more competitive and profitable.

4. Industry Buyer
Sometimes known as “the buyer of last resort,” this type is often a competitor or a highly similar operation. This buyer already knows the industry well and, therefore, does not want to pay for the expertise and knowledge of the seller. The industry buyer is interested mainly in combining manufacturing facilities, consolidating overhead, and utilizing the combined sales forces. These buyers will pay for assets (but probably not what the seller thinks they are worth); they will not pay for goodwill, covenants not to compete, or consulting agreements with the seller. There can be some cases in which the industry buyer is also a strategic buyer, with the price determined by motivation.

5. Financial Buyer
Of all the buyer types, financial buyers are most influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.

Each type of buyer has distinctive characteristics that correlate to the motivation behind the purchase of a particular company. In addition, the price each is willing to pay for a company is directly proportional to the motive. The relative sizes of acquisitions by different buyer types (compressed into their broader categories), is shown in the accompanying chart (keep in mind that all figures are approximate):

 
Type of Buyer (Less than $3 million) ($3 to 10 million) ($10 million):

 

Sole Proprietors (45%) (25%) (5%)

Public Companies (30%) (20%) (20%)

Private Companies (10%) (15%) (15%)

Investment Groups (20%) (30%) (20%)

Why Do Deals Fall Apart?

In many cases, the buyer and seller reach a tentative agreement on the sale of the business, only to have it fall apart. There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves–and such an awareness should include facing potential problems before they swell into floodwaters and “sink” the sale.

What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business.

The Seller Fails To Reveal Problems 
When a seller is not up-front about problems of the business, this does not mean the problems will go away. They are bound to turn up later, usually sometime after a tentative agreement has been reached. The buyer then gets cold feet–hardly anyone in this situation likes surprises–and the deal promptly falls apart. Even though this may seem a tall order, sellers must be as open about the minuses of their business as they are about the pluses. Again and again, business brokers surveyed said: \”We can handle most problems . . . if we know about them at the start of the selling process.

The Buyer Has Second Thoughts About the Price 
In some cases, the buyer agrees on a price, only to discover that the business will not, in his or her opinion, support that price. Whether this “discovery” is based on gut reaction or a second look at the figures, it impacts seriously on the transaction at hand. The deal is in serious jeopardy when the seller wants more than the buyer feels the business is worth. It is of prime importance that the business be fairly priced. Once that price has been established, the documentation must support the seller\’s claims so that buyers can see the “real” facts for themselves.

Both the Buyer and the Seller Grow Impatient 
During the course of the selling process, it\’s easy–in the case of both parties–for impatience to set in. Buyers continue to want increasing varieties and volumes of information, and sellers grow weary of it all. Both sides need to understand that the closing process takes time. However, it shouldn’t take so much time that the deal is endangered. It is important that both parties, if they are using outside professionals, should use only those knowledgeable in the business closing process. Most are not. A business broker is aware of most of the competent outside professionals in a given business area, and these should be given strong consideration in putting together the “team.” Seller and buyer may be inclined to use an attorney or accountant with whom they are familiar, but these people may not have the experience to bring the sale to a successful conclusion.

The Buyer and the Seller Are Not (Never Were) in Agreement 
How does this situation happen? Unfortunately, there are business sale transactions wherein the buyer and the seller realize belatedly that they have not been in agreement all along–they just thought they were. Cases of communications failure are often fatal to the successful closing. A professional business broker is skilled in making sure that both sides know exactly what the deal entails, and can reduce the chance that such misunderstandings will occur.

The Seller Doesn\’t Really Want To Sell 
In all too many instances, the seller does not really want to sell the business. The idea had sounded so good at the outset, but now that things have come down to the wire, the fire to sell has all but gone out. Selling a business has many emotional ramifications; a business often represents the seller\’s life work. Therefore, it is key that prospective sellers make a firm decision to sell prior to going to market with the business. If there are doubts, these should quelled or resolved. Some sellers enter the marketplace just to test the waters; to see if they could get their “price,” should they ever get really serious. This type of seller is the bane of business brokers and buyers alike. Business brokers generally can tell when they encounter the casual (as opposed to serious) category of seller. However, an inexperienced buyer may not recognize the difference until it\’s too late. Most business brokers will agree that a willing seller is a good seller.

Or…the Buyer Doesn’t Really Want To Buy 
What\’s true for the mixed-emotion seller can be turned right around and applied to the buyer as well. Buyers can enter the sale process full of excitement and optimism, and then begin to drag their feet as they draw closer to the “altar.” This is especially true today, with many displaced corporate executives entering the market. Buying and owning a business is still the American dream–and for many it becomes a profitable reality. However, the entrepreneurial reality also includes risk, a lot of hard work, and long intense hours. Sometimes this is too much reality for a prospective buyer to handle.

And None of the Above 
The situations detailed above are the main reasons why deals fall apart. However, there can be problems beyond anyone’s control, such as Acts of God, and unforeseen environmental problems. However, many potential deal-breakers can be handled or dealt with prior to the marketing of the business, to help ensure that the sale will close successfully.

A Final Note 
Remember these components in working toward the success of the business sale:

  • Good chemistry between the parties involved.
  • A mutual understanding of the agreement.
  • A mutual understanding of the emotions of both buyer and seller.
  • The belief, on the part of both buyer and seller, that they are involved in a good deal

Buying (or Selling) a Business

The following is some basic information for anyone considering purchasing a business. Is may also be of interest to anyone thinking of selling their business. The more information and knowledge both sides have about buying and selling a business, the easier the process will become.

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 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. More than 70 percent will have less than $250,000 to invest. In many cases the funds, or part of them, will come from personal savings followed by financial assistance from family members. He, or she, will never have owned a business before. Despite what he thinks he wants in the way of a business, he will most likely buy a business that he never considered until it was introduced, perhaps by a business broker.

His, or her primary reason for going into business is to get out of his or her present situation, be it unemployment, job disagreement, or dissatisfaction. The potential buyers now want 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 fact, it is probably fourth or fifth on their priority list. In order to pursue the dream of owning one’s own business, the buyer must be able to make that “leap of faith” necessary to take the plunge. Once that has been made, the buyer should review the following tips.

Importance of Information 

Understand that in looking at small businesses, you will have to dig up a lot of information. Small business owners are not known for their record-keeping. You want to make sure you don’t overlook a “gem” of a business because you don’t or won’t take the time it takes to find the information you need to make an informed decision. Try to get an understanding of the real earning power of the business. Once you have found a business that interests you, learn as much as you can about that particular industry.

Negotiating the Deal 

Understand, going into the deal, that your friendly banker will tell you his bank is interested in making small business loans; however, his “story” may change when it comes time to put his words into action. The seller finances the vast majority of small business transactions. If your credit is good, supply a copy of your credit report with the offer. The seller may be impressed enough to accept a lower-than-desired down payment.

Since you can’t expect the seller to cut both the down payment and the full price, decide which is more important to you. If you are attempting to buy the business with as little cash as possible, don’t try to substantially lower the full price. On the other hand, if cash is not a problem (this is very seldom the case), you can attempt to reduce the full price significantly. Make sure you can afford the debt structure–don’t obligate yourself to making payments to the seller that will not allow you to build the business and still provide a living for you and your family.

Furthermore, don’t try to push the seller to the wall. You want to have a good relationship with him or her. The seller will be teaching you the business and acting as a consultant, at least for a while. It’s all right to negotiate on areas that are important to you, but don’t negotiate over a detail that really isn’t key. Many sales fall apart because either the buyer or the seller becomes stubborn, usually over some minor detail, and refuses to bend.

Due Diligence 

The responsibility of investigating the business belongs to the buyer. Don’t depend on anyone else to do the work for you. You are the one who will be working in the business and must ultimately take responsibility for the decision to buy it. There is not much point in undertaking due diligence until and unless you and the seller have reached at least a tentative agreement on price and terms. Also, there usually isn’t reason to bring in your outside advisors, if you are using them, until you reach the due diligence stage. This is another part of the “leap of faith” necessary to achieve business ownership. Outside professionals normally won’t tell you that you should buy the business, nor should you expect them to. They aren’t going to go out on a limb and tell you that you should buy a particular business. In fact, if pressed for an answer, they will give you what they consider to be the safest one: “no.” You will want to get your own answers–an important step for anyone serious about entering the world of independent business ownership.

Why Do Deals Fall Apart?

In many cases, the buyer and seller reach a tentative agreement on the sale of the business, only to have it fall apart. There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves–and such an awareness should include facing potential problems before they swell into floodwaters and “sink” the sale.

What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business.

The Seller Fails To Reveal Problems 
When a seller is not up-front about problems of the business, this does not mean the problems will go away. They are bound to turn up later, usually sometime after a tentative agreement has been reached. The buyer then gets cold feet–hardly anyone in this situation likes surprises–and the deal promptly falls apart. Even though this may seem a tall order, sellers must be as open about the minuses of their business as they are about the pluses. Again and again, business brokers surveyed said: \”We can handle most problems . . . if we know about them at the start of the selling process.

The Buyer Has Second Thoughts About the Price 
In some cases, the buyer agrees on a price, only to discover that the business will not, in his or her opinion, support that price. Whether this “discovery” is based on gut reaction or a second look at the figures, it impacts seriously on the transaction at hand. The deal is in serious jeopardy when the seller wants more than the buyer feels the business is worth. It is of prime importance that the business be fairly priced. Once that price has been established, the documentation must support the seller\’s claims so that buyers can see the “real” facts for themselves.

Both the Buyer and the Seller Grow Impatient 
During the course of the selling process, it\’s easy–in the case of both parties–for impatience to set in. Buyers continue to want increasing varieties and volumes of information, and sellers grow weary of it all. Both sides need to understand that the closing process takes time. However, it shouldn’t take so much time that the deal is endangered. It is important that both parties, if they are using outside professionals, should use only those knowledgeable in the business closing process. Most are not. A business broker is aware of most of the competent outside professionals in a given business area, and these should be given strong consideration in putting together the “team.” Seller and buyer may be inclined to use an attorney or accountant with whom they are familiar, but these people may not have the experience to bring the sale to a successful conclusion.

The Buyer and the Seller Are Not (Never Were) in Agreement 
How does this situation happen? Unfortunately, there are business sale transactions wherein the buyer and the seller realize belatedly that they have not been in agreement all along–they just thought they were. Cases of communications failure are often fatal to the successful closing. A professional business broker is skilled in making sure that both sides know exactly what the deal entails, and can reduce the chance that such misunderstandings will occur.

The Seller Doesn\’t Really Want To Sell 
In all too many instances, the seller does not really want to sell the business. The idea had sounded so good at the outset, but now that things have come down to the wire, the fire to sell has all but gone out. Selling a business has many emotional ramifications; a business often represents the seller\’s life work. Therefore, it is key that prospective sellers make a firm decision to sell prior to going to market with the business. If there are doubts, these should quelled or resolved. Some sellers enter the marketplace just to test the waters; to see if they could get their “price,” should they ever get really serious. This type of seller is the bane of business brokers and buyers alike. Business brokers generally can tell when they encounter the casual (as opposed to serious) category of seller. However, an inexperienced buyer may not recognize the difference until it\’s too late. Most business brokers will agree that a willing seller is a good seller.

Or…the Buyer Doesn’t Really Want To Buy 
What\’s true for the mixed-emotion seller can be turned right around and applied to the buyer as well. Buyers can enter the sale process full of excitement and optimism, and then begin to drag their feet as they draw closer to the “altar.” This is especially true today, with many displaced corporate executives entering the market. Buying and owning a business is still the American dream–and for many it becomes a profitable reality. However, the entrepreneurial reality also includes risk, a lot of hard work, and long intense hours. Sometimes this is too much reality for a prospective buyer to handle.

And None of the Above 
The situations detailed above are the main reasons why deals fall apart. However, there can be problems beyond anyone’s control, such as Acts of God, and unforeseen environmental problems. However, many potential deal-breakers can be handled or dealt with prior to the marketing of the business, to help ensure that the sale will close successfully.

A Final Note 
Remember these components in working toward the success of the business sale:

  • Good chemistry between the parties involved.
  • A mutual understanding of the agreement.
  • A mutual understanding of the emotions of both buyer and seller.
  • The belief, on the part of both buyer and seller, that they are involved in a good deal

Why is seller financing so important to the sale of my business?

Surveys have shown that a seller who asks for all cash, receives on average only 70 percent of his or her asking price, while sellers who accept terms receive on average 86 percent of their asking price. That’s a difference of 16 percent! In many cases, businesses that are listed for all cash just don’t sell. With 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 will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one), or other pertinent details of the business. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer’s proposal, the buyer can withdraw it at any time. At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, “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.

Once you and the buyer are in agreement, both of you should work to satisfy and remove the contingencies in the offer. It is important that you cooperate fully 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 advisors to help them 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 use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. You might also ask if their schedule will allow them to participate in the closing on very short notice. If you and the buyer want to close the sale quickly, usually within a few weeks, unless there is an alcohol or other license involved that might delay things, you don’t want to wait until the attorney can make the time to prepare the documents or attend the closing. Time is of the essence in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in 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 just 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 buyer. They can find the right buyer for your business, work with you and the buyer in negotiating and along every other step of the way until the transaction is successfully closed. They can also help the buyer in all the details of the business buying process.

A business broker is not, however, a magician who can sell an overpriced business. Most businesses are saleable 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.

How long does it take to sell my business?

It generally takes, on average, between eight to twelve months to sell most businesses.  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 time period should be.  It is also important that the business be priced properly right from the start.  Some sellers, operating under the premise that they can always come down in price, overprice their business.  This theory often “backfires,” because buyers often will refuse to look at an overpriced business.  It has been shown that the amount of the down payment may be the key ingredient to a quick sale.  The lower the down payment, generally 40 percent 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.

Should I Hire a Business Lawyer?

Sellers and Buyers should have a business lawyer for preparation and review of the legal documents.  Make sure that the attorney you hire has time in his or her schedule to devote to your transaction and have relevant experience in advising buyers regarding business transfer transactions.  Lack of experience often translates into the buyer paying for education of the attorney.  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 that many attorneys are not qualified to give business advice. Your attorney will be, and should 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. The attorney works for you, and you must have a say in how everything is done.

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; that “leap of faith” between looking and actually being in business for yourself is a decision that only you can make!

Why should I go to a business broker?

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.

What happens when I find a business I want to buy?

When you find a business, the business broker will be able to answer many of your questions immediately or will research them for you. Once you get your preliminary questions answered, the typical next step is for the broker to prepare an offer based on the price and terms you feel are appropriate. This offer will generally be subject to your approval of the actual books and records supporting the figures that have been supplied to you. The main purpose of the offer is to see if the seller is willing to accept the price and terms you offered.

There isn’t much point in continuing if you and the seller can’t get together on price and terms. The offer is then presented to the seller who can approve it, reject it, or counter it with his or her own offer. You, obviously, have the decision of accepting the counter proposal from the seller or rejecting it and going on to consider other businesses.

If you and the seller agree on the price and terms, the next step is for you to do your “due diligence.” The burden is on you – the buyer – no one else. You may choose to bring in other outside advisors or to do it on your own – the choice is yours. Once you have checked and approved those areas of concern, the closing documents can be prepared, and your purchase of the business can be successfully closed. You will now join many others who, like you, have chosen to become self-employed!

What does it take to be successful?

Certainly, you need adequate capital to buy the business and to make the improvements you want, along with maintaining some reserves in case things start off slowly. You need to be willing to work hard and, in many cases, to put in long hours. Unfortunately, many of today’s buyers are not willing to do what it takes to be successful in owning a business. A business owner has to, as they say, be the janitor, errand boy, employee, bookkeeper and “chief bottle washer!” Too many people think they can buy a business and then just sit behind a desk and work on their business plans. Owners of small businesses must be “doers.”

What should I Look for?

Obviously, you want to consider only those businesses that you would feel comfortable owning and operating. “Pride of Ownership” is an important ingredient for success. You also want to consider only those businesses that you can afford with the cash you have available. In addition, the business you buy must be able to supply you with enough income – after making payments on it – to pay your bills. However, you should look at a business with an eye toward what you can do with it – how you can improve it and make it more productive and profitable. There is an old adage advising that you shouldn’t buy a business unless you feel you can do better than the present owner. Everyone has seen examples of a business that needs improvement in order to thrive, and a new owner comes in and does just that. Conversely, there are also cases where a new owner takes over a very successful business and not soon after, it either closes or is sold. It all depends on you!

How are businesses priced?

Generally, at the outset, a prospective seller will ask the business broker what he or she thinks the business will sell for. The business broker usually explains that a review of the financial information will be necessary before a price, or a range of prices, can be suggested for the business.

Most sellers have some idea about what they feel their business should sell for – and this is certainly taken into consideration. However, the business broker is familiar with market considerations and, by reviewing the financial records of the business, can make a recommendation of what he or she feels the market will dictate. A range is normally set with a low and high price. The more cash demanded by the seller, the lower the selling price; the smaller the cash requirements of the seller, the higher the price.

Since most business sales are seller-financed, the down payment and terms of the sale are very important. In many cases, how the sale of the business is structured is more important than the actual selling price of the business. Too many buyers make the mistake of being overly-concerned about the full price when the terms of the sale can make the difference between success and failure.

An oft-quoted anecdote may better illustrate this point: If you could buy a business that would provide you with more net profit than you thought possible even after subtracting the debt service to the seller, and you could purchase this business with a very small down payment, would you really care what the full price of the business was?

What is the real reason people go into business for themselves?

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. 

Why should I buy a business rather than start one?

An existing business has a track record. The failure rate in small business is largely in the start-up phase. The existing business has demonstrated that there is a need for that product or service in a particular locale. Financial records are available along with other information on the business. Most sellers will stay and train a new owner and most will also supply financing. 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.

A Buyer's Quandary

Statistics reveal that out of about 15 would-be business buyers, only one will actually buy a business. It is important that potential sellers be knowledgeable on what buyers go through to actually become business owners. This is especially true for those who have started their own business or have forgotten what they went thorough prior to buying their business.

If a prospective business buyer is employed, he or she has to make the decision to leave that job and go into business for and by himself. There is also the financial commitment necessary to actually invest in a business and any subsequent loans that are a result of the purchase. The new owner will likely need to execute a lease or assume an existing one, which is another financial commitment. These financial obligations are almost always guaranteed personally by the new owner.

The prospective business owner must also be willing to make that “leap of faith” that is so necessary to becoming a business owner. There is also the matter of family and personal responsibilities. Business ownership, aside from being a large financial consideration, is very time consuming, especially for the new business owner.

All of these factors have to be weighed very carefully by anyone that is considering business ownership. Buyers should think carefully about the risks – and the rewards. Sellers should also put themselves in a buyer’s position. The services of a professional business broker or intermediary can help determine the relative pros and cons of the transaction.