7 Seller Questions
- What does a business broker do?
- How are businesses priced?
- How long does it take to sell a business?
- What happens when a buyer becomes
interested in a business?
- When the parties reach agreement.
- What can sellers do to help sell their
- Should the seller finance part of
What does a business broker do?
Business brokers facilitate the successful sale of businesses by helping
determine the price of the business, helping to structure terms that
will be acceptable to both the seller and to the buyer and finally,
coordinating the sales process until the transaction is successfully
In addition to helping the seller fairly value the business, structure
the transaction and find the right Buyer, Beltway also acts as a “project
manager.” Beltway coordinates the sale process with a seller’s
other professional advisers, lenders and other relevant parties, works
with the seller to obtaining financing and plans for an orderly, profitable
change in ownership.
How are businesses priced?
Inevitably in a first meeting a prospective seller will ask Beltway
what we think their business will sell for. However, before Beltway
can arrive at a price or a range of suggested prices for the business
a review of the businesses’ financial information will be necessary.
Most sellers have some idea about what they feel their business should
sell for and this is certainly taken into consideration. However,
Beltway is familiar with market considerations and by reviewing the
financial records of the business we can make a recommendation of
what we feel the market will dictate. A range is normally set with
a low and a high price. Sellers that are willing to help the buyer
with financing typically get a higher asking price.
How long does it take to sell
a business? Back
It generally takes, on average, between seven and twelve months to
sell most businesses. Some types of businesses will take longer to
sell, while others will sell in a shorter period of time. It is 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,
purposely overprice their businesses. This theory often backfires,
because buyers often will refuse to look at an overpriced business.
Almost all businesses are salable if the price is fair and the terms
are structured properly.
Experience has shown that the down payment is a key ingredient affecting
how quickly a business sells. A lower down payment generally results
in a shorter 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.
What happens when a buyer becomes
interested in a business? Back
When a buyer is sufficiently interested in a business, we help the
potential buyer in the preparation of an offer. This offer, proposal
or letter of intent may have one or more contingencies. Usually contingencies
concern detailed reviews of financial records and may also include
a review of lease arrangements, franchise agreement (if applicable)
or other pertinent business details. The buyers’ proposal will
then be presented to the seller for his or her consideration.
It is important for sellers to look at each offer carefully. At first
glance sellers may not be pleased with a particular offer. However,
offers may be lacking in some areas but may have counterbalancing
advantages in other areas that warrant serious evaluation. There is
an old adage that “the first offer is generally the best offer.”
This does not mean that all first offers should be accepted but it
does mean that all offers should be carefully evaluated.
When the parties reach
When a seller and buyer come to an agreement, Beltway works with both
parties and their trusted advisors (attorney, CPA, partner, etc) to
satisfy and remove contingencies in the offer. It is important that
sellers cooperate fully in this process. Most important for a seller
is that they do not do anything that might lead the buyer to believe
that some aspect of the business is being hidden. The buyer may bring
in outside advisors to help evaluate the business and an advisor’s
reasonable request warrants a timely response.
When all contingencies have been cleared 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. As your
business broker, Beltway will work with you throughout the entire
What can sellers do to help sell
their business? Back
First and foremost consider the sale of a business like the sale
of a home: fix up, clean up, paint as appropriate, and make sure
everything is in good working order. This is very basic but many
sellers overlook or give little attention to this very important
first step. “You get only one chance to make a good first
impression.” Also, seller should notify his attorney and account
so that any necessary paperwork can be started.
Sellers must take time to cooperate fully with Beltway and with
any other professionals involved in the process. A buyer will want
up-to-date financial information and sellers must work with their
accountants to make current information available. Also, the attorney
that is involved should be familiar with the closing process for
a business in the appropriate state. If the seller and buyer want
to close the sale quickly, usually within a few weeks, the attorneys
must be prepared to meet the schedule. The failure to close on schedule
may permit the buyer to make changes in the original proposal.
And, finally, a seller’s team of advisors must all be working
towards the common goal of selling the business for the best price
and terms available in the marketplace, and closing the sale as
quickly as possible. As your business broker Beltway is on your
side every step of the way.
Should the seller finance
part of the transaction? Back
Perhaps a better question is “how much of the purchase will
a seller finance?” In order to assure your business is sold
as soon as possible, it a good idea if the seller helps a qualified
buyer with some seller financing. If a seller is unwilling to help
with the financing there will almost always be a longer sales process
and lower price. On the positive side however, sellers only have
offer short term financing—generally five to seven years.
The loan will be amortized over a longer payment schedule, perhaps
15 to 20 years, so there will be a “balloon” principal
payment to the seller at the end of the term. But 5 to 7 years after
the sale the new owner should be well established and in a better
position to obtain his or her own financing.