If you are thinking about selling your business, then preparation is the key to getting the best possible selling price at the best terms. How soon do I need to prepare to sell my business? Having a good exit strategy in your business plan is prudent. Successful businesses keep a current business plan on file [...]
If you are thinking about selling your business, then preparation is the key to getting the best possible selling price at the best terms.
How soon do I need to prepare to sell my business?
Having a good exit strategy in your business plan is prudent. Successful businesses keep a current business plan on file all the time, which includes a great exit strategy. This may not be a priority for new entrepreneurs, or owners of flourishing businesses but keep in mind that an exit strategy is just as good as an expansion strategy. Investors, banks and other sources of growth funds will look at the same information that the buyers review.
An exit strategy emphasizes those elements of a business that constitute value to the market. By having an exit plan in place and in mind, a smart business owner will naturally focus on the growth of their business.
So to answer the question, how soon do I need to prepare to sell my business? The answer is, NOW.
Where do I begin?
When your business is on the market for sale, qualified buyers with Non Disclosure Agreements will ask for historical records including (but are not limited to) tax returns, profit and loss statements, sales receipts/collections, asset information, customer account longevity, etc. Owners with easily verifiable data to present to a buyer tend to sell their businesses faster and at a better price. Plus, good books and records are essential in getting business acquisition financing from a lender, such as an SBA loan. Therefore, keep an organized file of important documents from the last 2-4 years.
How do I Increase the Value of my Business?
- Sustain or increase sales
Remember that one of the most valuable asset of the business is the goodwill. Owners can sometimes get distracted when they are thinking about selling the business. However, it is important to remain focused in finding, servicing and retaining clients during this process.
- Operate a Self-Sustaining Business
Train your management team and create a system for the company so the business will be less dependent on you. A buyer finds an owner-absentee or semi-owner absentee business more attractive than a business where the owner is critical in the daily functions. If the owner is the only key decision-maker, the value of the business will be limited without the owner. And the buyer may feel that the business they are taking over will not succeed without the current owner.
At what point do I put my business up for sale?
If you are burnt out, get out. If at some point you are feeling that you no longer have the energy or are beginning to lose the passion, it may be the time to put the business up for sale. Otherwise, it will likely be mismanaged and will decline in value. Besides, it takes an average of 6-9 months to sell a business.
For owners who hesitate and ask, why shall I sell my business if it is successful? Because buyers will pay more for a growing business than a business in decline.
I am ready to sell my business, what’s next?
Get professional advice and assistance. As they say, the attorney who represents himself has a fool for a client. The same applies for an owner who tries to negotiate the sale of their own business. An experienced advisor can guide sellers in the valuation of the business, marketing, and the screening of potential buyers. They can help in organizing the information that buyers and lenders typically require when they are evaluating the business.
While you may think you can get more money selling the business on your own, without a competent business consultant or business broker, you may actually decrease the overall sale price of your business.
For a free expert evaluation, contact Mina Singson at 310-882-2200 x 125 or firstname.lastname@example.org.
As with most businesses, price is a prime factor in selling a restaurant fast. However, restaurants can sell for their asset value alone, such as furniture, fixtures and equipment (FF&E) along with their permits and licenses. Knowing how to value those assets is the key to selling a restaurant quickly. Price is not the only [...]
As with most businesses, price is a prime factor in selling a restaurant fast. However, restaurants can sell for their asset value alone, such as furniture, fixtures and equipment (FF&E) along with their permits and licenses. Knowing how to value those assets is the key to selling a restaurant quickly.
Price is not the only determining factor in procuring a quick sale. You need to get into the “buyer mindset” and make sure a buyer sees the same value in your restaurant as you do. Here are some no nonsense step to getting your restaurant sold fast:
1. Price – Price – Price!!!
Just like anything else… the better the deal, the faster someone will snatch it up. Some factors that go into determining the price are location, FF&E replacement values, permits and licenses.
2. Make it easy to understand -
If you want to sell your restaurant above and beyond the asset value, make sure your books and records are in order. If someone can’t understand your books and records, they generally aren’t going to pay much for your restaurant.
- Put together a list of inventory and other assets such as furniture, fixtures and equipment (FF&E) and list their replacement costs.
- Make sure you have straight forward profit and loss statements for the last three years
- Find a way to prove cash sales (start keeping a handwritten record on the side, if necessary)
- List out your cost of goods sold (COGS)and monthly food waste costs, if possible
- Have any employment contracts organized and ready for review
- List out any debt that will need to be dealt with in the sale
3. Write up your story-
How and why you opened this restaurant, what are the opportunities and the obstacles and why you are selling. Also, list how you advertise to customers. Quote some reviews, etc.
4. Clean it up-
Make sure chairs, tables and décor are in good shape. The kitchen and bathrooms should be spotless and free of clutter and all equipment should be operational. Your staff should be friendly & knowledgeable and the general environment should be pleasant to customers. Also note that messy inventories tend to scare away buyers.
5. Review your lease- (unless you are selling property with the business)
Make note of your expiration date, what extension option you have and any transfer clauses. A buyer will either assume your current lease or negotiate a new one depending on the factors within your lease agreement.
6. Get a restaurant broker-
A good restaurant broker will help you get organized and help you determine the best price to expedite the sale. They will also advertise on the plethora of websites (I, for instance, advertise on at least 100 local, national and international sites dedicated to selling restaurants and businesses). A good restaurant broker will also discreetly market to people within the restaurant industry, help you negotiate the best deal and, most importantly, make sure the deal closes.
There is a lot that goes into selling a restaurant, much more than many other types of business. A restaurant needs be positioned for sale to get it in front of the right buyers. We currently have over 3,000 buyers in our database alone. For a free consultation, please don’t hesitate to call Restaurant Broker, Shelli Margolin-Mayer at (310) 882-2200 ext. 128. http://www.bizex.net/business-broker/shelli-margolin
Drowning in business debt!?! Even when a company’s sales start increasing, debt can eat away at the profits… 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 [...]
Drowning in business debt!?! Even when a company’s sales start increasing, debt can eat away at the profits…
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.By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128
Anyone who has ever sold a business knows that attracting interested and qualified buyers is the name of the game.
Anyone who has ever sold a business knows that attracting interested and qualified buyers is the name of the game. When a buyer has inquired about your business for sale they will have questions about the business and how it runs. You or your broker should answer those questions and interview the buyer. You want a buyer who is genuinely interested in this business, one who has the skills necessary to run the business, and the financial wherewithal to make this purchase. Your questions and the buyer’s answers must resolve these issues. If you do not know about your buyer you are likely to waste a lot of time and take your eye off of running your business and finding the right buyer.
There are many nightmares that the wrong buyer can cause:
- Fear and concern among your employees: Buyers often stop by your business and the wrong buyer will talk to your employees, and accidentally alert them that you are selling the business. This invariably causes fear and concern from your people. Often employees start looking for a job when they know the business is for sale even though they would likely have a job with the new owner.
- The release of confidential information: The wrong buyer might talk to your competitors and perhaps even share your confidential or financial information with them.
- A very expensive waste of time: The worst of all is having your business essentially off of the market for several months while you are working with them on due diligence and find you have lost all that time and opportunity because they can’t or won’t complete the transaction.
Your plans to move to Montana or to buy that other business are shattered.
The good buyer:
- Will be asking lots of questions which are perfectly normal and necessary. You need to engage the buyer in conversation. If the buyer is not willing to answer your questions it is likely that they are not genuinely interested and/or qualified
- Will agree to sign a “Non Disclosure Agreement.” Before you move beyond the general information about your business to the more confidential and financial information, Again, authentic buyers will be willing to do this. Your broker will have the appropriate form
- Will respect your confidentiality
- Will be as honest with you as he expects you to be with him
At the risk of repeating myself;
- genuine interest in your business
- the skills to operate it effectively
- and the financial resources to make the purchase
These are the key characteristics of a good buyer for your business. If they do not have these traits, they may cause many problems; they are probably not your buyer and are likely to be a waste of your time.
When you do find a qualified buyer who has taken serous interest, you should be forthcoming and as helpful as you can be to help move the process forward. In most cases you will have some financial interest in his success.
A good Business Broker is experienced in handling buyers and eliminating some of these nightmares. The broker can help make a fair deal for both of you, guide you through the complicated process and help create successful transition for the buyer too run his or her new business. The best deal is one that works for everyone.By Stuart Gross, Read My Profile
Like most small business owners in Los Angeles and throughout Southern California, we’ve heard about the benefits of hosting our own blog. After exploring this further, we found out about the time commitment and it made us cringe. Two or three blog posts a week? We don’t have time for that. We are so busy; [...]
Like most small business owners in Los Angeles and throughout Southern California, we’ve heard about the benefits of hosting our own blog. After exploring this further, we found out about the time commitment and it made us cringe. Two or three blog posts a week? We don’t have time for that. We are so busy; we have a hard time getting out of the office most days!
So we delay and explore other ways to promote our business and wait for someone else to figure out the magic recipe on how to blog time and cost effectively.
Then one day the phone rings and I spend 30 to 45 minutes talking to another first time Buyer who is interested in buying a business. Most of which is spent going over some really basic things they need to know before moving forward. BizEx, our company who specializes in brokering the sale of small and medium sized businesses, gets calls like this almost every day. So I decided to condense these conversations into writing and posted “How to Buy a Business” on my website, and for Business Sellers, How to Sell a Business just to save myself from another daily 45 minute conversation.
Then it dawned on me that this is really what blogging should be about. We should blog to save us and our client’s time and money, by sharing the information they need to fulfill their part of the business sales process. Things that they really need to know and would derive significant benefit from. It’s all about efficiency.
BizEx’s core mission is the support of Entrepreneurialism, and we have a lot to give. We use a consultative approach which requires us to learn what is most critical about every business we represent from the owners who are experts at what they do. Our Brokers specialize in a variety of industries including Retail businesses, Restaurants, Manufacturing companies, Dry Cleaners, Service related businesses like Film and Entertainment companies, Internet ecommerce businesses, and a host of other businesses that would take too much space to list. We have a wealth of information we can share for the benefit of entrepreneurs that we take for granted: Information that would promote the sales cycle and reduce the risk and anxiety associated with the purchase of a business.
Are there SEO benefits we can derive from our blogging efforts? Sure. For Google, content is king. The better the quality of information we provide, the more Google, Yahoo, MSN, Bing and other search engines are going to like us. This will equate to higher search engine rankings for our best work.
So now we’re bloggers. We plan on writing a lot more posts in the near future. We hope our fellow entrepreneurs will find them interesting enough to read and comment on.
Welcome to the Biz Blog!By Michael S. Davidson | BizEx Business Broker Profile | 310-882-2200 Ext 101