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TWENTY QUESTIONS
YOU SHOULD ASK BEFORE YOU SELL YOUR BUSINESS. |
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Q.What is a business broker? |
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A. A
business broker is a professional who specializes only in helping people buy and sell
businesses. They are trained in evaluating and pricing a businesses, qualifying and
working with prospective buyers, negotiating and most important, structuring the
transactions.
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| Q.
Are Real Estate Agents also Business Brokers? |
A. No,
while there are some similarities in how they operate, real estate agents sell real estate
while business brokers sell only privately held companies. The techniques of
pricing, marketing and negotiating a business transaction are completely different from
selling a piece of property.
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| Q.
How important is confidentiality in selling a business? |
| A.
Confidentiality is crucial to a successful sale. If employees, customers, creditors,
suppliers or competitors hear that a business is for sale, it could have a negative impact
on the business. thereby making it less desirable. Between a business owner and
broker, there must be complete trust and confidentiality. |
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| Q.
How do you value a business? |
| A. Helping to
value a business is one of a business broker's most important roles. The broker
considers the market area the business is in and then compares the business to similar
companies that are selling in the market. The broker also looks at the cash flow,
plus the tangible and intangible assets of the business and taking a buyer's perspective,
determines what the market would pay for the company. The broker must assess such
diverse factors as how long the business has been established the number and nature of
competitors and seasonal variations in cash flow. |
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| Q.
Is there any charge for evaluating my business? |
| A. No, there
should be no costs to the seller until the broker accomplishes what he is employed to do
-SELL YOUR BUSINESS. |
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| Q.
Are there any up-front costs? |
| A. No, we
evaluate, package and market the business and get paid only when we get results. |
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| Q.
What is considered Net Operating Income? |
| A. NOI consists
of all non-business related expenses charged to the company, plus non-recurring
expenses. Included in this amount is the owner's salary, bottom line profit of the
business, any over paid family member (i.e., the wife is part-time bookkeeper and earns
$30,000), interest expenses if there is a loan on the business depreciation, etc. By
the same token, if there are expenses a new owner would incur that aren't charged to the
business, they would have to be put back. (i.e., wife does bookkeeping but isn't
paid). |
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| Q.
Can I price my business on potential? |
A. The selling
price of a business is based on past performance, however a buyer will not buy a business
without potential.
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| Q.
Can I get all cash for my business? |
| A. The
percentage of businesses that sell for all cash are very small. From the outset,
sellers should understand that, in most cases, they will need to help finance a
sale. In fact, almost 90% of all independent business sales transactions require at
least some seller financing. This keeps the seller interested which helps to insure
the continuing success of the business and ultimately benefits all parties. Seller
should imagine themselves in the role of the buyer. A way to make the business easy
to buy is to help the buyer finance the purchase. |
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| Q.
Why can't the buyer go to a bank? |
A.
Unfortunately, banks have not proven helpful in financing the sale of small to mid-size
businesses. Since there is very little outside financing available, sellers
financing is an integral component of a successful sale.
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| Q.
Will I need to sell my corporation with the business? |
| A. In most
instances the buyer will purchase the assets of the company, both tangible and intangible,
and you will keep your corporation. The assets will include furniture, fixtures,
inventory, DBA name, etc. |
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| Q.
If I have a good lease, does this make my business more valuable? |
| A. Possibly, a
lease with low rent contributes to a good bottom line which adds to the value of the
business. Length is not a determining factor. |
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| Q.
What happens to my accounts receivable? |
| A. The accounts
receivable and payables belong to the seller. The difference between the two is
additional money that the seller will be able to collect as the receivables come in and
that is profit for the seller |
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| Q.
Must I pay off all my debts? |
A. Yes, all
outstanding bills must be paid unless expressly agreed to be assumed by the buyer. An
exception is leased equipment if the expenses of the lease are included on the P & L.
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| Q.
I have a lot of inventory and equipment. How do I know the new buyer won't sell it off? |
| A. The seller
will file a UCC-1 form -financing statement lien. This will list all the furniture
and equipment and will remain until it is paid off. Your inventory is protected with a
Minimum Inventory Level Guarantee which is written in the agreement. |
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| Q.
How long will I have to stay with the business after the sale? |
A. Most
businesses require 30-60 days of training. If the business requires more than 60 days of
training, the buyer generally will work out an arrangement with the seller to pay him for
his time, or to have him available as a consultant.
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| Q.
Is it necessary to give a sole and exclusive listing to sell a business? |
| A. A
professional business broker works as the sole and exclusive agent for the seller. This
enables both the broker and the seller to maintain the highest level of confidentiality
and means that their organization will be the only ones engaged in selling the
business. Without a sole and exclusive agreement, a quality broker would not be
willing to put the considerable time and expense needed to professionally package and
market the business. |
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| Q.
How long is the listing? |
A. The term of
the listing agreement varies from six months to a year. The average selling time of
most types of businesses is 100 to 120 days, but that timing can be affected by specific
market conditions.
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| Q.
Won't I be better off selling my business through a multi list service? |
| A. No selling a
business in not like selling a home. Confidentiality must be a key concern for
sellers. Using multi-list service would be like telling the world you're selling
your business. Maintaining strict confidentiality is necessary in order to safeguard
the ongoing business. |
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| Q.
Why is The Ronald Lawrence Group the logical choice to market my business? |
| A. Since its
founding in 1985, The Ronald Lawrence Group's focus has been to serve the needs of the
middle market. The specialized products and services available are designed to
provide owners with options that enable them to make informed decisions regarding the
direction of the business and their own personal future and the means to implement their
decision. |
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