Important Issues To Understand

Those business owners who decide to take advantage of a favorable market should act quickly to launch the selling process.

There are vital steps to take–and crucial realizations to face–in preparing for this all-important transaction.

1. Resolve current problems

as soon and as thoroughly as possible. If the business is a partnership, both parties should be agreed about the major decisions to be made in the selling process. Hopefully, in cases where the business is a partnership, a buy-sell agreement is firmly in place.

2. Financial records

  must be accurate, up-to-date, and impressive indicators of the owner’s business ability. Some buyers may be willing to buy potential, but they don’t want to pay for it. In fact, sellers should be open about all aspects of the business that might affect the sale; otherwise, once the real facts are revealed (as they inevitably will be!), the sale may be lost.

3. Sellers  must understand

from the beginning that they may have to help finance the sale. The seller’s business broker, in qualifying potential buyers, will also assess their financial credibility and their ability to run a successful business, thus helping to take the understandable fear out of seller financing.

4. Sellers should also seek the advice

of a business professional in determining price. The business broker will apply industry-tested valuation methods, and will incorporate those intangibles to be ensure that the business will not be underpriced. At the same time, the business broker will point out to sellers how the price is dictated by the marketplace and that realistic pricing is an absolute must. Most buyers, faced with an out-of-sight price won’t wait for it to drop–they’ll just go elsewhere.

5. In marketing the business for sale

, sellers benefit many times over from the guidance of a business broker professional. The business broker who lists the particular business for sale represents the seller and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to the seller. The broker will also present and assess offers, and, at the appropriate juncture, he or she can also help in structuring the sale transaction itself. The broker and the seller become a team, involved in a relationship of mutual trust, with the common goal being the successful business sale.

If you have made the decision to sell your business, the wisest first move is to contact a qualified business broker professional, who can . . .

• Advise you on pricing and structuring the sale of your business.
• Prepare the marketing strategy, using professional resources.
• Determine the right buyer for your particular business.
• Educate buyers in the business-buying process.
• Keep you informed about market reaction.
• Present offers and point out strengths and weaknesses.

When it comes time to sell, one of the best decisions a business owner can make is to continue managing his or her business efficiently (and profitably), while depending on the services of a business broker to forge the steps of the sale. The business broker professional is an invaluable advisor during the entire process, offering both objectivity and negotiation skills honed through years of experience in the buying and selling of businesses.

…..Article by Tom West

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 three components in working toward the success of the business sale:

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

…..Article by Tom West

Your best guide for buying or selling a business isn’t words on paper–it’s the competent presence of a business broker.

Although business brokers generally represent the seller, the buyer also reaps the benefits of expert guidance. A business broker provides vital services for both parties and acts as the “glue” for holding together the pieces of the business sale process. Here’s how a business broker will work with both the buyer and the seller:

The Business Broker and the Buyer:

Business brokers prefer to talk to people in person, and the buyer is no exception. During a preliminary meeting in the business brokerage office, the broker will typically ask the prospective buyer questions such as these:

1. Do you have the necessary funds to buy a business?
2. Is the cash readily available?
3. What is your time-frame for buying a business?
4. What are your expectations about the purchase of a business?

After this fact-finding meeting, the broker can then show the buyer businesses that are both feasible and that fit the buyer’s requirements. Further steps the broker will lead the buyer through are as follows:


Since sellers are (rightly) concerned about confidentiality, the broker will ask the prospective buyer to sign a non-disclosure or confidentiality agreement.

The broker will provide the prospective buyer with preliminary information about one or more businesses, including pertinent financial data. The broker will arrange for the buyer to see businesses of interest. Once the buyer has indicated strong interest in a particular business, the broker can then supply additional information and schedule further on-site appointments.

When the buyer is ready, the business broker will be the best source for answering questions, addressing concerns, resolving loose ends, and offering a business broker’s unique expertise in the business sale transaction.

The Business Broker and the Seller:

When it comes time to sell, one of the best decisions a business owner can make is to continue managing his or her business efficiently (and profitably), while depending on the services of a business broker to orchestrate the steps of the sale. To make the seller’s job easier and more effective, the business broker will…

Determine the right buyer for a particular business. For locating and qualifying prospective buyers, a business broker uses computerized databases to access comprehensive lists of local, national, and international buyers…all to increase the chances of selling a business at peak value.

Advise the seller on pricing. The business broker is an expert in placing a realistic price on the business and incorporating intangibles; thus reducing the danger that every seller fears…under pricing the business. At the same time, the business broker can help the seller to understand that the selling price is dictated by the marketplace…not by a well-meaning accountant or friend who may have an unrealistic idea of what the business is worth.

Prepare a marketing strategy and offer advice about essential marketing tools, such as a business description memorandum; in fact, the broker will help the seller in all key aspects of presenting the business as effectively as possible. Later, the broker can also help in the structuring of the sale transaction.

Present offers and point out both strengths and weaknesses. The business broker will be a vital advisor during most stages of the negotiation, bringing to “the table” objectivity as well as negotiation skills developed through years of experience in the buying and selling of businesses.

………Article by Tom West

A survey of business activity nationwide shows that many sellers are taking advantage of the window of opportunity offered by today’s favorable marketplace.

In this recent survey, almost one-third of business owners responded that they are considering the sale of their business. The first question one might ask, given the relatively healthy financial climate, is WHY? Selling when times are good? The answer, for many sellers, can be a resounding YES! Here are some of the reasons why, followed by tips for getting the process started.

The Buyers Are Out There:

The current economic upturn has depended to a great extent on trimming the corporate fat. Executives and middle managers out of work–and determined not to be “downsized” by big business again–are eyeing the advantages of being in business for themselves. Since 1990, the percentage has steadily grown of those corporate executives who leave jobs in order to become independent business owners. It isn’t just the money they are dreaming of–it’s the desire for more control over their lives.

How to find these buyers?

  The business broker is the professional to whom sellers turn when looking for serious, “qualified” buyers. The business broker not only helps match the right buyer with the right business, but also educates the buyer in the buy-sell process, alleviating concerns and keeping the transaction in steady forward motion. With plenty of buyers to choose from in today’s market, it’s more important than ever to identify the time-wasters and those who think they want to buy but really aren’t ready to take the big step.

It’s Better To Cash-Out Than To Burnout:

  Burnout can come with a business that’s successful as well as one that’s failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout?

That isolated feeling:

  The burnt-out owner has been “chief cook and bottle washer” for such an extended period of time that even routine acts of decision-making and action-taking seem like Sisyphean tasks. These owners have been shouldering the burdens alone too long.

Fuzzy perspective:

  Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily challenge, and problem-solving sometimes goes no further than the application of business band aids that cost money in the long run rather than increase profits.

No more fun:

  Of course owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread–or boredom–should consider moving on to a fresh challenge elsewhere.

Just plain tired:

  Simply put, many business owners burn out from the demands placed on them to keep their companies operating day after day, year after year. The schedule is not for everyone; in fact, statistics show that it’s hardly for anyone, long-term.

The important point here is for business owners to recognize the signs and take action before burnout begins to hinder the growth–or sheer survival–of the business. Many of today’s independent business owners feel they’ve worked hard, made their money and sense that now is a good time to “cash-out” and move on.

The Best Price Comes from Selling While Up:

  Other than burnout and its consequences, there are other factors that can lead to the “forced sale” of a business. Compelling personal problems (a divorce or death in the family, poor health), shortage of capital or outright failure of the business, the lack of heirs to take over–these are the traditional examples. Instead of waiting for unfavorable conditions, potential sellers should keep a wary eye out for that all-important right time for putting their business on the market. When might that time be?

The Small Business Administration (SBA),

  in researching selling trends, reports that three to five years is a long enough stretch for many of today’s business owners. One in every three plans to sell; many of them right from the outset. The business they’ve bought is not a legacy for their children–it’s a shorter-term investment of their time as well as their money. The ability to present a healthy operation, with an owner in the position to “role model” its success are major advantages in the completion of a successful business sale. One of the surest ways to maximize the value of a business is not waiting too long to sell.

…..Article by Tom West

I was an ex-banker but had helped a brother-in-law in his small manufacturing company. Having shared this with First Venture and what our income needs were, they showed us two businesses that were right on target for us. I was prepared to put a contract on one, and if it “didn’t fly,” we would have gone after the second. The first business contract sailed through and today, ten years later, we couldn’t be happier with our business and for First Venture helping us though the buying process. R.F.

We moved down from Wisconsin, not knowing any one in the Tampa area. I had been downsized from the corporate world and thought I would buy a “job” and my wife would go to work for someone. Low and behold, we bought two businesses from First Venture, one for her and one for me. Even though they were good businesses, we were not seeing enough of each other so we went back to First Venture and they sold one of the businesses for us. We then combined our efforts on the other business. Ultimately we decided we didn’t want to keep that business either. We are happy to say, they sold that business for us also.

I was tired of working in the “family business” and my dad suggested that maybe I should buy my own. I envisioned a coin laundry or vending business that would give me plenty of time to fish. After First Venture learned about my background and they suggested a Tree Service of all things. After seeing its earnings and that I didn’t have to climb a tree, I could easily see how my marketing talents and heavy equipment experience could be put to use. It was a perfect match. Thanks to First Venture, they turned my life around!

I contacted First Venture by phone from Texas looking for a manufacturing business in the Tampa Bay area. After communicating back and forth by phone and fax, they convinced me that I needed to fly out to see four of the businesses that they thought met our criteria. After one trip I was convinced two of the four would meet my needs. Even though it was a larger business than I thought we could afford, First Venture showed us how we could get a combination of SBA and owner financing to make the deal work. I could not be more pleased with service and how they made it happen! I am currently looking to acquire another business through them that will give me a larger market share. N.M.

After much blood, sweat and tears; three landlords; and the widening of Dale Mabry I didn’t know if our Health Food Store would fail before we had the opportunity to sell it. Twelve years later and with over a $1,000,000+ gross sales I am happy to say First Venture sold our business and helped us to move on to our next venture. It was not an easy sale as it seemed that the attorneys battled more back in forth structuring an asset sale, then a stock sale and back again to an asset sale. Through it all, First Venture held the deal together, when numerous times it looked like the sale was dead. If you’re looking for a good company to sell your business, look no further than First Venture Associates. We are thankful for their services. C.T.

I sold my Tree Service through First Venture and was so pleased with the results that I have referred four of my business owner friends to them. B.C.