FOR SELLERS: Steps to Get Your Business to the Closing Table
Listing Meeting
This is the sales pitch. Understand our creative advertising techniques, review the listing agreement, and provide for us as much information as possible to start preparing your business profile package.
Business Information
Once you have signed the listing agreement, you tell us the basic information regarding your business.
The more you share, the easier it is to sell. We ask that you complete the owner’s sales pitch, because experience shows that the best descriptions to excite buyers come from the sellers, and our marketing experts will work with this information to create a dynamic approach.
Financial Information
We do not believe in providing detailed financial information to buyers before a purchase agreement has been completed. This being said, basic information like gross sales, cash flow, payroll, cost of goods, monthly rent, and expenses is needed to show qualified buyers what they can expect when they purchase your business.
Showing the Business
Be prepared to make a great first impression. When a buyer sees the business, and meets with the owner(s), the connection & sale are often made. Tell the buyers everything that makes your business unique. Talk about both the positive & negative parts of the business. Explain the things a buyer could do to improve the business. Details & honesty go a long way toward getting offers. All meetings are scheduled during off hours so daily business is not affected.
Letter of Intent & Earnest Money
Plan to negotiate and make counter offers; this is normal. Consider partial owner financing as this can really help buyers feel confident that they are purchasing a viable, thriving business. We expect a letter of intent and earnest money from the buyer.
Due Diligence and Preparing for Closing
Once the contract is ratified, you must be prepared to prove all of the information you have given regarding your business. You will need to show your detailed books, and explain to the buyer what it will take to run & maximize the potential of the business. Many business owners have a lot of personal transactions reflected in their books, and it needs to be explained to the buyer. For instance, tell them if you pay your cell phone bill or other personal expenses through the business. This shows the buyer exactly where the discretionary money is located.
Closing the Sale
Just before closing there will be a thorough background check run on the business. If there are any liens, lawsuits or other issues, they must be cleared before closing. Do your best to have a clean record. We will provide more information about closing to help you prepare. |
article from Entrepreneur.com
Richard Parker
In the past fifteen years, I have personally purchased ten businesses and have sold nine of them. I have used a business broker in nearly every transaction. Even though I would consider myself a very savvy buyer, there are three things that a business broker can do that are very helpful.
Business-For-Sale Listings
They can provide you with access to business-for-sale listings and details about the business that you may not discover on your own. Although the majority of businesses sold in the U.S. are not done through brokers, some states have a multiple listing service of businesses for sale, similar to residential real estate. In states that do not offer this, brokers will often only show you their own listings. In those cases, you'd have to work with several brokers just to see a variety. You may want to search for your state's "business broker association" and see if such a service exists.
Always Good To Have A Buffer Between You and The Seller:
They can be a conduit to help deliver bad news to the seller. There may be instances where you have to retract or modify an offer and certainly times where you'll need to adopt an aggressive negotiating position. Since you'll most likely need the seller to train you after the purchase, it's not a good idea to aggravate them too severely. As such, let the business broker deliver the bad news.
The Paperwork Is Astounding
A business purchase, no matter how small, requires a tremendous amount of coordination and document chasing. The data you'll need from a seller to evaluate a business, the documentation required to close a deal and the overall chasing that must be done between buyer/seller and their professional advisors, can be astounding. A good broker will be an enormous help putting all of it together.
Using the Right One:
In addition to being frequently asked by readers of my book about brokers, I also receive the greatest number of complaints from readers, about brokers. While many of these complaints are justified, equal amounts are due to a basic misunderstanding of what a broker can or cannot do.
A business broker cannot help you buy the right business. They can assist you, but ultimately it is up to you to make that decision. A business broker cannot afford to spend countless unpaid hours searching for the right business for you. The search is something that you must do. They'll provide you with the tools to do it, but it's your responsibility to get the ball rolling. A business broker cannot conduct the investigation for you. They may suggest common things to look for, but they won't be your detective. A business broker cannot negotiate the best deal for you. Most will certainly attempt to bring all parties to a point of understanding, but if you want the best deal, then you must realize that nobody cares more about your investment than you do.
Meet with several until you find one who makes you feel comfortable, here are a few questions you should ask them:
- How experienced are they?
- How many transactions have they been involved with?
- Have they ever owned their own business?
- Do they specialize in a particular business type?
- What references can they provide?
- How many clients are they working with presently?
- How many agents work in their office?
- Do they share/co-broker listings with other offices? If yes, of the total number of businesses they've sold in the past year, how many were their own listings and how many belonged to other agents? (this will indicate their willingness to suggest businesses to you based upon your needs, not simply because it's their listing as long as there is sharing of listings between brokers).
Your Presentation Will Determine Everything
Don't just call or email a broker inquiring about a particular listing. The point of your contact is to first determine how effectively they communicate and to get the dialogue going.
In your first contact, don't ask for three years of financials or other confidential information. Simply express your interest and request that they send you a standard non-disclosure document to execute so they will be able to tell you more about the business.
Help Them to Help You
Once you begin to speak with a broker, if you feel good about their attitude, follow up and arrange to meet them. Keep in mind that you want them to keep an eye out for the hottest listings for you. To accomplish that you must convey several things to them:
- Show them you're serious. A business broker wants to be sure that if the right opportunity comes along, you'll be ready to buy!
- Prepare a laundry list of the types of businesses you're interested in purchasing
- Present them with your personal financial statement
- Tell them precisely how much money you have to invest
- Ask them for suggestions as to how you should conduct your search
- Ask them to show you how to best navigate the Internet
- Call them regularly, at least once a week.
- For the first couple of businesses that you locate on your own, ask them to check them out. See how long it takes for them to give you data or follow up with you. If it's more than a couple of days, use someone else.
Business brokers have a role to play. Use them effectively and they can be a solid asset to help you complete the deal. Likewise, if they do not demonstrate a serious commitment to follow up on your requests, then get another broker.
But remember, no matter how effective a broker is, when all is said and done, the task of buying the right business is ultimately, entirely, in your hands!
About the Author
Richard Parker is President of Diomo Corporation – The Business Buyer Resource Center™
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