Why use a business broker?
The process of buying or selling a business requires dedicated, professional
attention. Marketing and facilitating a business transfer is a full-time
job! You deserve someone who will work as hard as you do. Business brokers
have a unique knowledge of the market based on their evaluations of
many businesses. A qualified Broker will save buyers and business owners
money by helping them to avoid costly mistakes, effectively marketing
the appeal of the seller’s business, and maximizing exposure to
serious, qualified buyers—all with complete confidentiality.
For example, ask yourself:
- How do you reach qualified buyers, possibly including competitors,
without disclosing your intentions to sell?
- How do you evaluate your business objectively to ensure you receive
top dollar for your investment and avoid costly negotiating tactics?
- How do you prepare and provide the information a prospective buyer
will require to interest him or her in pursuing your business in favor
of other options?
- How do you arrive at the best price and terms, including the intangible
and goodwill values of your business?
- How do you maximize your favorable exposure to potential offers
while minimizing your potentially damaging public exposure to customers,
competitors, employees, and suppliers?
- How do you market your business in all of the appropriate markets,
databases, and media efficiently, effectively and confidentially?
- How do you screen and pre-qualify buyers, determine their motivations,
managerial capabilities, and financial strength?
- How do you effectively sell your business, diverting significant
time, effort and resources to that process, while continuing to manage
your ongoing business productively?
The answer is clear: The sale of your business demands a professional,
just as running your business demands a professional. Beltway Business
Brokerage has the expertise, tools, and connections to market and sell
your business successfully. We work very hard to protect your business
investment and maximize your net after-tax profit on the sale. It is
to our advantage and yours to obtain the best possible price that a
reasonable buyer will pay. We pledge to maintain high ethical standards
and open and honest communications in all of our business relationships.
What affects businesses marketability?
Most critical are price and terms. When a business is over-priced or
the owner does not offer reasonable terms there will be few, if any,
buyers interested in acquiring the business. When a business is priced
realistically, and with proper terms, several buyers are likely to pursue
acquiring the business. Competition among buyers creates higher selling
prices. A buyer who knows he has other buyers competing for the business
will be highly motivated to offer the price being asked to ensure he
does not lose the business to another buyer’s better offer.
Secondly, the quality of the information provided to a prospective
buyer is critical. When a seller has complete and accurate financial
information that alleviates any doubt as to its propriety, a buyer can
become much more conformable with the business and the terms. The value
of the assets and cash flow generated by the business must be provable
How can sellers protect themselves
when financing a portion of the sale? Back
Sellers are always concerned about how they can protect themselves when
they sell their business and finance a portion of the transaction. Listed
below are several things sellers should consider to protect themselves
for a worse case scenario:
What is the minimum down payment a
seller should require? Back
- Background check—A buyer’s background should be investigated.
Research should include credit reports, personal assets, work experience
and personal references.
- Life insurance—Buyer’s can be required to maintain a
life insurance policy with the seller as beneficiary.
- Additional collateral - If the buyer has a home with significant
equity, commercial real estate or other investments, a seller can
ask for those assets to used as collateral.
- Personal guarantee—A seller can require the buyer to personally
guarantee the loan from the seller.
- Asset restrictions—Depending on the circumstances a seller
may want to restrict the new owner’s acquisitions, expansions
and sale of assets until the seller’s note is paid in full.
- UCC filing - The Uniform Commercial Code adopts the “notice
filing” approach, under which an abbreviated notice is filed
with the appropriate filing officer evidencing that a debtor and secured
party intend to engage in a secured transaction using specified collateral
The down payment the seller requires may be more important to the successful
sale of a business than the sales price. The size of the down payment,
interest rate and length of re-payment all contribute to a successful
sale. Over eighty percent of all businesses sold above $100,000 are sold
with one-third or less down with the owner financing the balance. Asking
for one-half down will reduce the price by approximately twenty percent.
Asking for cash will reduce the price to forty to sixty percent of the
one-third down payment price.
A buyer is trying to buy as much business
as possible for the cash he has available for the down payment. When
a seller asks for $200,000 down on a $400,000 value business, the buyer
may well keep looking until he can find a $600,000 value business where
the owner will accept $200,000 down and finance the balance. High percentage
down payments cause buyers to discount offers. The business owner who
asks for all cash will generally not succeed in selling the business
because buyers know they can buy three times as much business for the
However, in all instances we do recommend a down payment. When a buyer
has a serious stake in the business there is less likelihood the buyer
will default if difficulties arise. Banks typically require 25-30% minimum
down payment from a buyer to approve a business purchase loan. A seller
should set the minimum down payment at least the same level.
Sellers also have expenses after the sale that should be considered
in making the down payment determination:
- Taxes—sales tax, stock transfer tax, real estate stamp tax
and other taxes due at the time of the transaction.
- Income taxes—substantial income taxes may be due on any gain
on the sale.
- Loans—After-tax cash will be required to payoff any business
loans not assumed by the buyer.
- Fees—appraiser, attorney and accountant’s fees, and
any broker’s commissions.
Regardless of the amount a seller may need when their business is
sold, however, Beltway recommends that a down payment of 25-35% be
What role will a seller play
after the sale? Back
Unless the buyer has experience in the seller’s business, the
buyer will probably want the seller to stay on for a short period while
the new owner gets comfortable in the new business.
Except in the rare case of an all cash buyer, the seller is going to
be tied to the business to some extent until the buyer retires the seller’s
note. Not only is it fair for the buyer to ask the seller to advise
and consult in the short-term, it’s in the sellers best interest
to be available to help the new owner while he or she learns the ropes.
It also might be the key that helps to sell the business faster and
for more money.
New Criteria For SBA Business Acquisition
SBA has established new underwriting criteria for Business Acquisition
requests. Therefore, when considering applications where any portion
of the loan proceeds will be used to finance a change of business ownership,
lenders will have to pay particular attention to determine that:
- The change of ownership is an arms length transaction,
- The lender, or qualified independent individual, determines the
value of the small business, and
- The loan file is well documented regarding the valuation and includes
the substantiating analysis.
In addition, if the new change of ownership is less than 3 years from
a previous change in ownership, the lender must get 2 formal business
Can Beltway Brokerage sell
my business? Back
A broker cannot really “sell” your business because he does
not know how your business operates. A professional broker’s initial
job is to get a business listed at the best possible obtainable price
and with realistic terms of sale. The next job is to qualify buyers
to keep you from wasting time with people who are not financially qualified
to meet your requirement. Qualified buyers will be presented your business
profile after they have completed a Confidentiality Agreement. The broker
will then schedule a meeting between the business owner and the interested
buyer. The business owner will explain the business to the buyer. After
this meeting, the broker will work to get a written offer to purchase.
The broker will then present the offer and after acceptance will coordinate
the due diligence process which precedes the closing.