• Is the business currently producing an income for the owner?
• Is the business seller retiring and fully funded his or her retirement plans?          • Does the sale of the business only represent a small part of the retirement portfolio?
• Is the business debt free?
• Do the financials show that the depreciation schedules are completely exhausted?

Affirmative answers to these questions tell the business buyer that the business is making enough money for their needs and you are indeed in a financial position to sell your business and sell it within the constraints of the marketplace.

Another thing that a buyer is going to want to know about is your plan for the future.  Nobody wants to get to the closing table only to have the owner decide that he or she wants to keep the business.  Equally, nobody wants to buy a business only to find out that you’re going to open a competing business.  This is why buyers like sellers that are clearly of retirement age and means.  If your business is complex or highly personal in nature, a buyer may require that you stay involved in the business for a period of time to provide a seamless transition.  If you have dreams of selling your business and moving to the Caribbean, this might be achievable. You may only have to adjust your time line a bit.

Now that you know some of the keys to attracting a buyer for your business, the next step is to find the right buyer for your business.  To do that you’re going to want someone to help you who understands business buyers.

Kendric Foultz is a certified business broker with decades of experience in deal making and working with business buyers and sellers.  Feel free to give him a call regarding your business related issues at 310-968-2369.

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More and more small business owners are finding that profits are going to servicing their debt and keeping their business operational.  In such cases, an option is to sell the business through a short sale.  Especially if a business owner is burnt-out, looking at shuttering the business and declaring bankruptcy.

Declaring bankruptcy is different as a small business owner.  It’s not just an anonymous bank or bureaucratic phone company that is owed money; it’s often suppliers and vendors with whom there are long-term personal relationships.  And often, friends and family have invested in the business or lent large sums of money to help keep the business afloat.

A short sale can provide creditors at least a portion of the funds owed to them, while alleviating the small business owner of having a bankruptcy tied to their name and credit.  It can also save the jobs of the employees.

Special note for franchise owners – If the business is under a franchise agreement and the franchise payments are grossly in arrears, there is a chance the franchisor can take back the business, leaving the owner without a business and still holding all the debt.  It is in the interest of the franchisor for the business to sell and bring in a new owner who will start paying royalties.

How it works –

An experienced and competent business broker will package the business based upon its net profit and assets.  The debt and other non-operational expenses will be added back to the net profit and an industry appropriate multiple will be determined.  If the business sells for less than what is owed, it is a Short Sale.  If it sells for more than what is owed, the owner will receive whatever is left over after all the debt is paid.

In a normal sale, an escrow is used primarily to protect the buyer from successor liability – any debt attached to the business.  In a short sale, the escrow process also aids the seller in settling the business’s debt.

Once all the debt is established, the escrow officer will prepare a seller’s estimated statement reflecting all secured and unsecured debt.  Secured debt includes tax liabilities, private liens, judgments, etc.  Unsecured debt includes private loans.  If the sale price covers all the secured debt, the remaining funds are distributed pro rata to the unsecured creditors.  If the sale price doesn’t cover all the secured debt, remaining funds are distributed pro rata to the secured creditors.

All creditors will need to agree on the payout in order to close the deal.  Since the alternative is usually bankruptcy for a small business owner, creditors would prefer to receive something rather than nothing.  Thus, they generally will agree to the pro rata payout.

Although short sales are messier than regular business transfers, they are a win-win for the buyer, the seller and the creditors.  The buyer gets a good deal on the business; the seller avoids bankruptcy and is alleviated of their debt while their creditors get something rather than nothing.

Enlist an experienced business broker.   They can help you overcome most obstacles and discreetly bring you qualified buyers.  We currently have over 3,000 buyers in our database alone.  For a free consultation, please don’t hesitate to call me.  Shelli Margolin-Mayer, Business Broker: (310) 882-2200 ext. 128.  I’m happy to help.

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A True Story

Restaurants are not necessarily an easy sell.  However, if they are priced at their proper value and positioned to sell in the right forums, they can be sold in a timely manner to the satisfaction of both the buyer and seller. Preparing the restaurant’s books and records for sale is as important as bringing in the right buyer. The following is a true story of a restaurant that recently sold through an experienced restaurant business broker.

When the Johnston’s[1] bought their pizza deli in Los Angeles five years ago, the plan was to build a business for their children to takeover.  Both Mr. & Mrs. Johnston had fulltime careers that they wanted to keep.  With the help of their son, the restaurant was able to sustain a positive cash-flow for several years.

However, both of their children started pursuing college educations in an unrelated field. Thus, the Johnston’s dream of passing the business on to their children vanished.  Mr. Johnston began spending more and more time running the restaurant while his son was in school.  Working at a full-time career and working in the restaurant soon became extremely stressful.

The stress and loss of motivation, along with a family illness, spurred the Johnstons to sell.  At the listing meeting, two pertinent questions were asked, 1) is your hood, floor drains and refrigeration exhaust in working order with valid permits and 2) what are your gross sales & net sales? These are the two most import issues regarding readiness for sale and determining price.

All the equipment and permits where in order. Thus, replacement costs were determined for the furniture, fixtures and equipment (FF&E).

Unfortunately, they didn’t have organized books and records.  Plus, a fair amount of sales where in unrecorded cash.  Once they reviewed the documentation they had and came up with annual totals for sales and expenditures, a legitimate profit and loss statement was created that a buyer could understand.

Because they hired staff to work the hours the family couldn’t, their net profits were negatively affected. The profit and loss statement was then adjusted to show what the restaurant would earn if the restaurant was owner-operated.

There was still the problem of the cash revenue. Some of the cash was pocketed as profit and some was used to pay employees and for inventory purchases.  It was expressly explained that onus was on the seller to prove the cash sales to a buyer.

Once there was a legitimate the profit and loss statement and the FF&E replacement cost was established, an asking price was determined based upon a multiple for restaurants selling in Los Angeles.

Twenty-one days after the listing was launched, an acceptable offer was presented.  The buyer was not exactly a good match, as he was looking for an investment and not a hands-on owner-operated restaurant.  However, the buyer was enthusiastic and he wanted to pursue the sale.  The Johnstons agreed. During the due-diligence period, the buyer wasn’t convinced of the cash sales. He made a formal request and was released from the offer.

Within two weeks another acceptable offer was presented.  This time the buyers were a family, the Garcias[2], who wanted to run the restaurant as onsite owner-operators.  They understood the concept of cash sales, however they needed proof.  Thus, the Garcias spent more time with the Johnstons during the due-diligence period.  Through an on-site visit, they gained confidence in some of the cash amounts that were stated.  However, it was not enough to justify the full asking price.  Together a price was negotiated with which everyone was comfortable.  The deal closed within 90 days from the time the listing was launched.

If a restaurant is marketed to the correct audience and can prove its net income, the right buyer is out there.  There is a lot that goes into selling a restaurant, much more than many other types of businesses.  The above story is just one example of restaurants I’ve sold. We currently have over 3,000 buyers in our database alone.  For a free consultation, please don’t hesitate to call me. Shelli Margolin-Mayer, Restaurant Broker: (310) 882-2200 ext. 128.  http://www.bizex.net/business-broker/shelli-margolin I’m happy to help.

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Put yourself in the Buyer’s shoes and price your business accordingly.  First of all the asking price and terms have to make financial sense relative to the historical earnings of the business along with future positive outlook for the business and  its industry.  In a great many cases, it’s the asking price that is preventing the sale.  Next take a look at the terms.  If the business has been approved for SBA financing then terms shouldn’t be a problem.  If the sale doesn’t qualify for outside financing and the seller wants more than 50% down payment then you are likely to have a problem.  Ask the business broker to show how the business would cash flow for a new owner.

Goodwill will likely be the most valuable element of your business.  A credible Confidential Business Review will substantiate the value to a Buyer and increase the likelihood of getting a reasonable offer.  Make sure that the business broker has been able to create a Confidential Business Review of the business that paints  an accurate picture of what is going on with your operation.  There should not be any significant gaps that would cause a serious buyer to wonder why relevant information is not included.  That is one of the best ways to turn off a good buyer.  While no two businesses are exactly the same, they do share many common elements and the buyers want to compare these elements from business to business.

Finally, make sure you’re getting the word out to the right buyer. Have a complete understanding of what the business broker is doing to market your business.  Sometimes an owner will know of something that would help the marketing efforts of the broker and should let the broker know right away.  This might be something like a particular trade journal or industry conference.  Don’t forget that this is a team effort.

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Jered brings years of business experience to BizEx.  Following a successful career as a college coach, he began overseeing operations and consulting with various companies and organizations in Philadelphia and Los Angeles.  He has worked with business owners in various industries, including restaurants, night clubs, health clubs, sports apparel retail, graphic design, and distribution centers.  Jered’s background emphasizes his knowledge in business development, operations management, and consulting.  He is a skilled communicator and project manager, helping clients understand the business selling and buying process.

As a BizEx Business Broker, Jered provides all relevant services business owners and business buyers require to be successful in the buying and selling of a business including: valuing businesses, marketing and listing businesses for sale, the creation of Confidential Business Reviews, pre-qualification of businesses for SBA business acquisition loans, working with Buyers to identify acquisition targets in relevant industries and facilitating transactions.

BizEx is a Los Angeles Business Broker providing M&A Quality Services for Small Business Owners.  We leverage our Technology and Expertise to Simplify & Expedite the Buying and Selling of Businesses.  In the buy sell business transaction, matching the right Buyer with the right Business is how we define success.

“We are happy to welcome Jered Champan to the BizEx team.  Jered brings prior Business Brokerage experience and excels in the project management, coaching, and communications elements of the transaction, which are core qualities of service in the business sales industry.”     –Michael S. Davidson, founder of BizEx

“I selected BizEx after having worked with other brokerages in the past.  I can aptly say that Michael Davidson brings professionalism that no other brokerage I have encountered can rival.  His sophisticated and comprehensive approach to the business sale and acquisition process allows brokers the resources to spend more time assisting our clients.  I am excited and honored to join Michael and the impressive group at BizEx.” –Jered Chapman, Business Broker

Jered’s profile can be read at http://www.bizex.net/business-broker/jered-chapman.  He can be reached by email at jchapman@bizex.net or by phone at 310-882-2200 Ext. 129.

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