FAQs – Sellers

In practice, this varies widely. Some businesses receive multiple offers in the first week and close within 90 days, while others take a year or more to sell. Many factors including the asking price and terms, the size and condition of the business, the state of the industry and economy, and the experience and skill of the business broker impact the amount of time it takes to sell a business.


Sellers can improve the odds of a faster sale by agreeing to a reasonable asking price and providing accurate books and records. Businesses priced at a large premium (far above market value) generally take longer to sell as they tend to receive fewer inquiries than competitively priced businesses.

Confidentiality is the number one priority in the sale of any business. 

 

Every Buyer is required to sign a Non-Disclosure Agreement before receiving any information about a business. Additionally, our Brokers and documentation remind interested Buyers of their confidentiality obligation during every step of the purchase process.

 

BottomLine goes far above and beyond industry standards to maintain confidentiality, but remember that no broker can 100% guarantee the prospective sale will remain confidential. Should a confidentiality issue arise, rest assured we have the experience to resolve the situation.

Sellers generally ask this question from either a timing or a valuation viewpoint.


Best Timing: The best time to sell your business is when you're ready to sell, but not under particular pressure to do so. Selling from a position of strength means you'll have time for the sales process to play out and find the right Buyer. If you're already in a "must sell" position, don’t panic; we routinely work with Buyers in difficult situations. Reach out and we will help you determine the saleability of your business and quickly market it to our pool of qualified Buyers.


Best Valuation: You'll get the maximum value for your business when it is thriving and has clear financial statements demonstrating its' track record of generating great profits. Remember, increased profitability generally translates into increased sale price.


Bear in mind that in practice, the timing of a business sale is often determined by life events than either timing or valuation strategies.

Usually, yes; most businesses are saleable and have value for the right Buyer at the right price.


Every set of circumstances is different, so this question is difficult to answer properly without knowing the details of your particular business. The best solution is to reach out to an experienced Broker who can determine if your business is marketable.

Not necessarily.


We have sold many businesses over the years that were not profitable or even closed! Don’t assume in advance that your business has no value. Many businesses have strategic value to a Buyer aside from its' profitability: a desirable location, fixtures and equipment, employees, client base, etc. An experienced Broker can analyze the situation and determine what price the business might bring on the open market.

Business valuations are calculated using a variety of factors.


Seller’s Discretionary Earnings ("SDE") generally plays a large role in determining value, since businesses are usually priced based upon a multiple of their earnings. However, SDE is not the only factor: industry, longevity, employee structure, condition of the assets, inventory, location and lease, quality and diversity of the accounts, patents or intellectual property, and the general state of the economy can all impact a business's valuation. Outstanding business or personal debt, initial cost to establish or buildout the business, and projected future revenues have no direct impact on a business’s value.


No matter what any Broker claims your business is worth, the market ultimately determines its value. If it is priced too high and doesn't sell, its value to you is ZERO! BottomLine keeps this firmly in mind and will value your business with an experienced eye to determine an asking price the market will bear.

Not usually. For smaller businesses, an estimation of value should be part of the services provided by any reputable Business Broker. Brokers occasionally write valuations or refer third party valuation firms when necessary, such as in larger deals where a formal valuation might positively impact the sale, or when a valuation is required by a legal proceeding, the IRS, or as a requirement for Buyer financing.

This varies between businesses, but in general, Buyers look at:


  • Cash flow and income trends.
  • Location and lease terms.
  • Length of time the business has been established.
  • Quantity, quality, and diversity of the customer base.
  • Condition of the business’s assets. Is there costly deferred maintenance required? Do they need to be replaced? Are they useful to generate revenue?
  • Condition of the inventory. Is it current and saleable?
  • Clarity of the financial statements. We didn’t say “how profitable”; profitability is not always as important as whether the financial statements are straightforward and clear.
  • State of the industry. Remember, prospective Buyers are primarily interested in running a profitable business in your industry.

The most important things you can do to facilitate the sale of your business are:


  1. Keep clean, consistent books and records. Detailed financial statements allow proper valuation of the business and facilitate due diligence.  Poor record keeping will often discourage Buyers from making a written offer or entering escrow.
  2. Set a realistic asking price. Businesses with realistic asking prices and terms generate more inquiries and usually sell much faster. Businesses whose asking prices or terms are unreasonable sit on the market and become stale.
  3. Get an experienced Broker. Selling your business is one of the most important and complex transactions of your life. Experienced Brokers contribute a great deal to the process.
  4. Operate the Business Effectively. Run the business as if you weren’t selling until the day escrow closes, and maintain the profitability at the highest levels. Remember, Buyers are usually purchasing a going concern!

No! The first time any employee should learn about the sale is the day after the escrow has closed. Consider this:


  1. Any employee you tell is not bound to confidentiality by a Non-Disclosure Agreement, and may leak the news to a competitor, key customer, or the landlord with a devastating impact on the business.
  2. Employees who are aware of the prospective sale occasionally get nervous and make hasty decisions, when often the business (and ALL its employees) would experience better outcomes under a new owner.
  3. Circumstances sometimes change during the sales process, and the Seller doesn't sell the business. Employees who knew may wonder if the company and its leadership are viable long-term; some search for other employment. How might losing key staff damage operations, the other employee’s livelihoods, and your equity in the business?


ALWAYS keep a prospective sale 100% confidential; there is simply too much at stake to do otherwise.

Seller financing is never mandatory, but it is common.


Sellers who are willing to finance a portion of the deal demonstrate confidence in their businesses, which can attract additional Buyers or be a powerful negotiating tool. There is also a large pool of Buyers interested in Seller financed transactions, which can lead to faster sales and higher purchase prices.


Additionally, sometimes traditional lenders won't finance the entire purchase price of a business, even when a well-qualified Buyer is purchasing a solid company. In these cases, Seller financing can sometimes make the difference between completing a sale or no deal.


The possibility of Seller financing should always at least be discussed with your Broker to see how it may impact your particular circumstances.

Absolutely! Our transactions frequently include selling both the business and the associated real property. Businesses with the option to purchase the real estate tend to attract better capitalized Buyers and frequently get more favorable funding terms from lenders.

Generally, yes.


Interested Buyers will analyze the cash flow of your business to evaluate whether it supports the asking price, and prefer to see the last three years of financials when available. Financial statements that clearly and consistently categorize your income and expenses are a big positive, and tend to give Buyers confidence about their upcoming purchase. Refusing to share financials will be viewed as a major red flag by most Buyers and should be avoided whenever possible.


Every business is unique and will have its own bookkeeping quirks. If you’re considering selling, reach out to an experienced Broker, who can evaluate whether your current books and records are ready for the sales process.

First, we create high quality information packages highlighting the strengths and opportunities of each business. They include stats (summary financials, lease terms, etc.), the background of the sale, plenty of photos, and frequently a video tour or owner interview.


Next, we email our huge database of active Buyers who are interested in similar businesses and inform them about the new opportunity. Approximately 50% of BottomLine's deals come from our existing Buyer pool.


We also advertise discreetly on the popular business for sale websites. We remove all identifying characteristics of the business from our ads, describing the business in enough detail to generate interest and inquires.


Finally, BottomLine’s own website is a popular destination for Buyers looking to purchase businesses! Thousands of Buyers visit our website each week to find their dream business. Simply look at our current businesses for sale to get a feel for how we market.

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