FAQ

SELLER QUESTIONS

Selling or buying a business is one of the most important financial decisions you will make. We have the training and expertise to guide you through the process in a comfortable and efficient manner. We are team players who will coordinate the efforts of your professional advisors, such as attorneys and accountants. We have handled many transactions and understand the complexities of selling and buying a business.
During the process, the Seller’s job is to do what he does best, which is to run the business as if he were going to keep it. Our job is to confidentially market the business, find and screen the Buyers, educate them, negotiate the terms of the sale and provide a buffer for the emotional highs and lows that we all experience.
The Seller will also benefit because Business Brokerage Services has developed a substantial database of pre-qualified buyers that will lead to a faster and more satisfactory transaction.

Initially, business owners will be more involved, since we will need to gather information from you or other knowledgeable person, such as a CFO. You will need to provide information that will go into our marketing and sales package, including general company history and financials.
Afterwards, the most important thing for you, the owner, is to continue growing the business as if you plan to own it for the next decade. The worst thing that can happen after your business is placed on the market is for the financials to falter, so it is very important that everyone within the business remain focused on meeting the company’s objectives.

We understand that public knowledge of a potential sale can affect the attitudes and actions of customers, employees, competitors, lenders, suppliers, or investors, and thus the value of the company. Business Brokerage Services requires all prospective Buyers to review and sign a non-disclosure statement outlining his responsibility in having access to a Seller’s confidential information. This occurs before any detailed information concerning a specific opportunity is released. Additionally, we have many tools with our proprietary database and marketing tools where we do not need to reveal detailed information about your business. We are committed to protecting the confidentiality of the business sale.

Business Brokerage Services uses a variety of methods to market and advertise a Seller’s business in the most confidential and discreet manner possible. We realize the sensitivity of this issue and work diligently to protect the Seller’s employees and vendors from knowing that their business is for sale.
We use a proven combination of internet marketing, local marketing, and our proprietary database of potential purchasers developed over 10+ years selling businesses in Colorado. Additionally, we maintain a deep referral network from past clients, accountants, attorneys, real estate professionals.

It really depends on many factors – the type of business you are selling, location, price, time of year, condition of business – just to name a few. According to a recent survey done by Business Brokerage Press the average time on the market was 12 months; our average selling period is less than half of that — under 6 months on average. If you would like or need to sell your business more quickly, please contact us and we can discuss the possibility and trade-offs of a faster sale.
No broker can make an accurate prediction. Some businesses take months before they sell, and others get an offer in a matter of days. Your best bet is to set a reasonable selling price and have good books and work with a licensed, full-time Business Broker to prepare it for sale. After the initial consultation, an experienced Business Broker should be able to point out the challenges and advantages to your specific situation and give you his/her opinion.

Business Brokerage Services is familiar with market considerations and, by reviewing the financial records of the business, can make a recommendation of what we feel the market will dictate. A range is normally set with a low and high price. The more cash demanded by the seller, the lower the selling price; the smaller the cash requirements of the seller, the higher the price. Most sellers have some idea about what they feel their business should sell for – and this is certainly taken into consideration.
Since most business sales are seller-financed, the down payment and terms of the sale are very important. In many cases, how the sale of the business is structured is as important than the actual selling price of the business. Too many buyers make the mistake of being overly-concerned about the full price when the terms of the sale can make the difference between success and failure.

You are not required to finance any portion of the sale of your business, but you need to be aware of the many reasons to consider this option. With reasonable terms, the chances for a timely sale increase dramatically, and at a higher purchase price. In many cases, businesses listed for all cash simply do not sell. Unfortunately, most banks and lending institutions do not make loans for the purchase of businesses. The major reason is that most small businesses attempt to minimize the profits shown on financial statements to reduce tax liability. You will need to understand that your new buyer will be considered a new start-up without any track record. Seller financing may be the only way to sell your company. Business Brokerage Services will show you the various ways to protect yourself if financing is involved. Seller financing emphatically tells the buyer you have confidence in the continued success of the business and the company can make the payments.
Surveys have shown that a seller who asks for all cash, receives on average only 70 percent of his or her asking price, while sellers who accept terms receive on average 86 percent of their asking price. In many cases, businesses that are listed for all cash, and can’t qualify for SBA lending, just don’t sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. In some cases offering some financing can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. The basic initial information required is 3 years of profit and loss statements and income tax returns.

Another critical success factor in selling is to continue to run your business successfully. All buyers will want to verify recent months performance and if the numbers are decreasing it can make it very difficult to complete a sale.

Confidentiality – You must not tell anyone that your business is for sale. Key employees might resign, reducing the value to a prospective buyer. Employee theft may occur. Suppliers might jump ship. Competitors will use this information against you. Customers may leave and sales will drop. Confidentiality is also important to build the image value of your business to our prospect.

Business Hours – Please keep your normal operating hours. There is a tendency for some sellers to “letdown” when they put their businesses up for sale. However, the prospects must see your business at its best and most productive.

Housekeeping – Repair signs, replace lights, clean the premises, and dress up your presentation. Your business must look its best and any negative features eliminated before a showing.

Inventory – Maintain your inventory at a normal level, keep it fresh and properly displayed. Remove any items that are not included in the sale price, if possible.

Buyer/Seller Meetings – No one knows your business better than you do, so please help in physically showing your operation. Answer the buyer’s questions and be prepared to discuss the day-to-day operation. Do not discuss the purchase price or terms; defer these questions to your broker. It is best not to meet with a prospect without your Broker present. Our job is to get you the best deal; this cannot be done if we are out of the information loop.

Offers to Purchase – Business Brokerage Services has an obligation to bring you any and all offers, no matter what the price and terms. Astute buyers will usually make low initial offers to insure that they are going to get the best-possible price and terms. Do not feel insulted by low offers; this is just a starting point. The prospect that makes a low offer may be the prospect that eventually buys your business.

Immediately – Notify your Broker of any changes in your business; a buyer will quickly disappear if new information is disclosed after initial interest.

Potentially. We communicate with dozens of people every week who are seeking to buy a business. Additionally, we have a database of interested buyers for Colorado businesses developed over 10 years of being in business. If your business fits their needs we will try to match them with you.

When a buyer is sufficiently interested in your business, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one), or other pertinent details of the business. You may accept the terms of the offer or you may make a counter-proposal.  At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider.
Once you and the buyer are in agreement, both of you should work to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, 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.

Only if the property comes with the business. Sometimes, the property owner will sell the business and retain ownership of the property and continue to collect rent. Other times, the owner may wish to sell both. We do not sell Residential Property/Homes — we focus exclusively on the sale of businesses.

Business Brokerage Services will introduce your business to prospective buyers after they have signed our non-disclosure agreement. They will start the process through the written profile about your business along with detailed verbal description and response to questions. We encourage the buyer to visit your business (when possible) incognito to get a feel for the location, facility and nature of your operation. If there is continued interest we will then setup a buyer/seller meeting that will allow you to meet each other and to go into your business with greater detail.

No, we do not charge upfront fees. Be wary of Brokers who will inflate the price of your business and require you to pay an upfront fee based on the price of the business. Our commissions are based on ‘success’, if the business does not sell, you pay nothing.|
There is no fee or charge to a buyer. Our compensation is in the form of a commission earned when we successfully bring a buyer and seller together at the actual closing of the transaction. Our interest is educating you about the buying process and in finding a business that works for you. Business Brokerage Services will work very hard in understanding your needs and interests, and then staying with you throughout the entire process.

All negotiations are handled at arms length through Business Brokerage Services. The main reason is to maximize the price you can get for your business, but it is just as important to make sure the deal actually happens. All negotiations can be stressful and after you have closed the transaction you and the new owner must have a good working relationship for the transition period. You want what is best for you, but you do not want to discourage interested buyers.

BUYER QUESTIONS

This is a common belief, but a belief that is not usually correct. The vast majority of businesses for sale are being sold for human reasons rather than financial ones. Human reasons include health problems, change in the owner’s family situation, divorce, desire to do something else, relocation, retirement, or just plan burnout. Generally speaking, a business does not survive for several years if it is losing money consistently. However, most business owners will take advantage of every opportunity to reduce the income taxes that the business must pay on profits. Therefore, it is necessary to determine the true owner’s benefit to fully understand the financial health of the business. All of the businesses we offer for sale are earning a profit.

The amount of down payment varies depending on the type of business, the amount of hard assets included, the seller’s situation and your liquidity. Buying a business is actually very down payment driven. Naturally the amount of money you have for down payment determines the size business you can purchase. Typically, the more cash down you can offer a seller the lower the total sale price of the business. We will discuss with you the level of cash investment you will be comfortable with. Knowing your comfort level of cash investment is the most-important information that we need to know to match you with the right business.

There are several reasons to buy an existing business: Actual results rather than pro-forma. Immediate cash flow. Trained employees in place. Established suppliers and credit experience. Established customers and name recognition. Existing licenses and permits. Training by the seller. The possibility of owner financing.

When you find a business, we will be able to answer many of your questions immediately or will research them for you. Once you get your preliminary questions answered, the typical next step is for us to help you to prepare an offer based on the price and terms you feel are appropriate. This offer will generally be subject to your approval of the actual books and records supporting the figures that have been supplied to you. The main purpose of the offer is to see if the seller is willing to accept the price and terms you offered.
The offer is then presented to the seller who can approve it, reject it, or counter it with his or her own offer. You, obviously, have the decision of accepting the counter proposal from the seller or rejecting it and going on to consider other businesses.
If you and the seller agree on the price and terms, the next step is for you to do your “due diligence.” Once you have checked and approved those areas of concern, the closing documents can be prepared, and your purchase of the business can be successfully closed.

Obviously, you want to consider only those businesses that you would feel comfortable owning and operating. “Pride of Ownership” is an important ingredient for success. You also want to consider only those businesses that you can afford with the cash you have available. In addition, the business you buy must be able to supply you with enough income – after making payments on it – to pay your bills. However, you should look at a business with an eye toward what you can do with it – how you can improve it and make it more productive and profitable. Everyone has seen examples of a business that needs improvement in order to thrive, and a new owner comes in and does just that.

There have been many surveys taken in an attempt to answer this question. Most surveys reveal the same responses, in almost the same identical order of priority. Here are the results of a typical survey, listed in order of importance:

1. To do my own thing, control my own destiny.
2. I don’t want to work for someone else.
3. To better utilize my skills and abilities.
4. To make money.

Aside from our various valuation services, we get paid on a success-fee basis only at the close of a transaction between a buyer and seller. We therefore owe fiduciary responsibilities to the buyer, seller and transaction.
All negotiations are handled through Business Brokerage Services. The main reason is it is just as important to us to make sure the deal actually happens. All negotiations can be stressful and after you have closed the transaction you and the previous owner must have a good working relationship for the transition period. You want what is best for you, but you do not want to lose an opportunity due to a frustrated seller.
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