Why Use a Business Broker to Sell a Small Business?
According to experts, up to 90% of people fail to sell their businesses. Many business owners often ask themselves, “How to sell my business?” They end up debating whether to do this endeavor on their own or to use a broker.
People sell their businesses for multiple reasons, such as losing profit, wanting to do something else, wanting more time to themselves, or other reasons that aren’t listed. If you fail to sell your business, you may be stuck with debt or something you don’t want. It’s a challenging process, which is why using a broker plays a crucial role; continue reading to learn why you should get one.
Pricing
A knowledgeable business broker can assist you in obtaining the highest possible price. They know the market price structure and can provide important insight into how to price a small business.
If you overprice your business, the majority of prospective buyers will never ask about it. If you undervalue your business, you will not get what it is worth.
Save Time
A competent broker will free up time for you to operate your business and enjoy your personal life. It’s advantageous to have an expert on your side.
Apart from operating your small business, you have a lot of other responsibilities. Why not delegate the hard work to a business broker while you enjoy your time away from your company?
Confidentiality
A reputable business broker would ensure that a non-disclosure agreement or NDA is completed before disclosing anything about your company or even knowing its name. They may assist in explaining why a potential buyer will only get a limited amount of information before making an offer.
A seasoned business broker will weed out bidders who are just seeking information. They will spend time educating genuine buyers about the value of the business.
High-Quality Resources
Professional business brokers have access to resources and industry experts. They would know which SBA banks are lending due to their expertise.
They are acquainted with knowledgeable lawyers that can assist in crafting contracts or ending the sale of a business. They also offer a list of excellent accountants that are familiar with business finances.
Negotiation
Why waste time arguing back and forth when an expert can represent you to get your desired price. By using a business broker, you can remove the worry and personal aspects of the situation.
Marketing
A competent business broker will spend time developing a concise and effective business review (CBR or CIM) that summarizes all of your company’s critical information. A well-crafted presentation will assist the buyer in understanding the advantages of acquisition.
They’ll be able to provide an excellent overview with their acquisition advisers. A strong CBR is an effective instrument for assisting in the sale of your business.
Supportive Financial Representatives
A business broker can collaborate with you or your accountant to explain and clarify your company’s financial situation. This is often referred to as normalizing financial statements, and when presented properly, can help potential buyers understanding your business’s actual financial performance.
Tools
An expert broker will invest in and have access to various tools to help sell your business. They will have access to forms, databases of potential buyers, excellent websites, and much more. Before choosing a broker for the job, it’s advisable to ask them about the tools and techniques they will use to sell your business.
Brokers may use their years of expertise to look around corners and predict possible transaction difficulties in advance. They are intimately acquainted with each stage of the company’s selling process and will offer valuable guidance.
Sell Your Business Checklist: What to Prepare With Your Broker?
Approximately 20%-30% of small businesses listed for sale are successfully sold. In order to be better prepared, here are some items that are required to sell your business:
Required Records & Important Information Before Going To Market!
Prepare the following things before placing the company on the market:
- Three years worth of federal tax returns
- Three years worth of profit and loss statement and a balance sheet
- Three years worth of monthly bank statements
Ensure that you are aware of the proper yearly adjusted net income (cash flow, SDC) for the past three years. Serious buyers will want to know this information early on in the purchasing process, as well as how you obtained it from your tax returns and financial statements.
Obtains a Third-Party Business Valuation
Obtaining a competent company appraisal/valuation from a third party is essential for the selling process. 70% of all small businesses never sell because of the excessive asking price or poor deal structure.
The third-party valuation will be used by a variety of people throughout the selling process:
- Potential business buyers
- Lenders/financing companies for the buyer
- Other advisors/parties to the transaction
Prepare Your Team of Advisors, Attorney, and Accountants
A critical component of being prepared to sell a small business is having a reliable team of experts. This is not the time for your advisers to be on vacation. Make sure you have lined up expert advisers for the length of your transaction.
Database of All Potential Buyers
Maintain a folder or online database of all contacts, notes, and documentation. You want to ensure that you have backup purchasers if your initial one pulls out during the selling process. Maintain all escrow information, purchase agreements, signed non-disclosure papers, contact information for CPAs, attorneys, and other relevant information in this folder throughout the selling process.
Create a Business Profile
Buyers will need a great deal of information about the company being sold. Rather than having to describe the company to many buyers, create a one-page description of the business.
Here is the following information that should be in your one-page description:
- Business’s history
- The date it was founded
- Number of employees
- Significant characteristics
- Recommendation and strategies to run the business
- Geographic location
- Competition
- The reason for selling
- Amount of training provided following the sale
Non-Disclosure Agreements
Before disclosing any information, have all prospective buyers sign and date a Non-Disclosure/Confidentiality Agreement. Let them know the critical nature of maintaining the confidentiality of the company’s transaction and the legal consequences of failing to do so.
Gain Maximum Exposure
The most critical factor in this process is to ensure that large numbers of qualified buyers are aware that the business is for sale. You should expect to invest between $400 and $1,000 in advertising and marketing to reach an adequate amount of buyers.
Sell Your Business Tips: Finding a Reliable Broker
Many states require a broker to be a licensed real estate agent to sell their business. You can verify if an agent is properly licensed by doing a check on your state’s database. You should also make sure that the expert you choose has the experience and is sensitive to your requirements.
Finding a reliable broker can be challenging, but we are here to help. Contact Fusion Business Services to help sell your business today.
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12 Ways to Increase the Value of Your Company
1. Build a solid management team. A business with sales of $5 million and up needs a full complement of officers and directors. Such a team might include: a COO, a CFO, a sales manager and, depending on the of type business, an IT director. It is also beneficial to create a Board of Directors with at least two outside members. This professionalization of management can remove the stigma of “the one man band.” Not only will this build a stronger company, it will increase the value to a possible acquirer. Smaller firms should also build a strong management team, and creating an outside advisor group is also a good idea.
2. Loyal employees. Happy and loyal employees make for a strong company. Top management should have non-compete and/or confidentiality agreements. Solid benefits plans for all employees should be in place. A company’s greatest asset is its employees and perhaps its biggest value-increaser.
3. Growth. Some smaller companies are kept small to maximize the owner’s benefits – the proverbial “cash cows.” However, if building value is the goal, then developing new products or services, building market share, expanding markets or opening new ones, is critical. This generally requires a financial investment, but building a strong growth rate also builds value.
4. Understanding your market. The value of a company may be contingent on its industry, its place in the industry and the direction of the industry itself. How big is the industry, is it headed up or down, who is the competition and how big is the company’s market share? Is it time to change direction or diversify?
5. Size counts. Companies with less than $5 million in sales and an EBITDA of less than $1 million can be perceived as small. Therefore, they may be dependent on continuing outside financing and lack the critical mass for both buying and selling power. These companies can be perceived as too small for acquisition or are penalized when it comes to value. However, over the past few years corporate buyers, as well as private equity firms, have seen the advantages of purchasing smaller firms. Obviously, companies with $10 million or more in sales and an EBITDA of $1 million or more are considered as solid and able to stand on their own.
6. Changing direction. Small companies can be very adept at changing course and implementing change. They have to be able to change and move quickly to take advantage of new markets, to fill voids in existing markets and even to add or change products or services.
7. Documentation. Business plans, financial plans and personnel plans should all be in writing – and kept current. Terms of employment agreements should be spelled out and in writing. Business planning and company objectives, etc., should also be in writing and reviewed periodically. Contracts should be reviewed and maintained on a current basis.
8. Diversification. A major problem with many small companies is that their business is concentrated on one or two major customers or clients. Ideally, no customer or client should represent more than 10 percent of sales. Expanding to new markets, introducing new products, and finding new customers must be considered without deviating too far from the company’s core business.
9. Name and brand identity. Nothing beats the name Walt Disney, or Kleenex® or the soft drink called Coke® – they are household names. Small firms may not have the brand or name recognition of these companies, but they can work at it. This recognition is especially powerful in the consumer product area. But franchising has expanded this name or brand recognition to many different types of businesses.
10. Taking advantage of proprietary and other assets. Patents, brand names, copyrights, alliances, and joint ventures are all examples of not only proprietary assets, but, in many cases, valuable ones. Even equipment can be used in several different ways. Large landscape companies in cold climates put snow plows on their trucks, utilize their existing workforce and become a snow plowing company for their regular landscaping customers — office complexes, apartment and condo developments, etc.
11. “Lean and Mean.” Many companies lease their real estate needs, outsource their payroll, have their manufacturing done offshore, or have UPS handle all of their logistical needs. Since all non-core requirements are done by someone else, the company can focus its efforts on what they do best.
12. Do it now! The owners of small firms, even large ones, have an attitude that says, “I don’t have time now, I’ll do it tomorrow” or “I’m too busy now putting out fires.” So the real challenges of building the business, and value, get sidetracked or put off indefinitely. Creating value is critical to the long-term (and short-term) success of the business.
Keep in mind that the best time to consider selling is when business is good, the business is running profitably, and many of the above “value-adders” are in place. By contacting your local professional intermediary you can explore which of the above will add the most value to your firm, so it will be ready to sell when you are.
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How to Sell a Restaurant: The Ultimate Guide
Did you know there are just over 1 million restaurants in the US?
On some nights, nothing beats heading over to your favorite restaurant. It feels good to give up cooking duties for the night.
Unfortunately, on the other side of the coin, the owner of the restaurant is over their head. They’re pulling out their hair while you slurp pasta. Or they may simply ready to move on from the business.
Does the owner sound like you? If you own a restaurant and want to sell it, keep reading. We’ll teach you how to sell a restaurant.
Tidy Up the Appearance
Just like you would when you sell a house, spend time tidying up the appearance to better appeal to potential buyers. It’s best to survey the restaurant when there aren’t any customers.
Look at the flooring, doors, windows, and counters. Does anything need a renovation or repair? We’re sure some bumps and dents have occurred over the years.
Head into the kitchen for a peek. Are the appliances working correctly? How bad are the splotches and stains?
Take a look at the overall aesthetic of the restaurant. The decorations and paint job may need some love and care.
Lastly, tidy up the outside of the restaurant. Guarantee the entrance is inviting and appealing to those passing by.
Contact local designers and contractors for anything you need to be taken care of. To save money, head to the local hardware store to get supplies for minor DIY fix-ups.
Know the Legal Stuff
Potential buyers need to know all about the legal formalities. Be one of the most organized restaurants for sale by keeping track of your lease, licenses, and permits.
Guarantee everything is up-to-date, and highlight any important rules and guidelines the new owner needs to know. It’s best to type up a comprehensive handbook or document to present to a potential buyer.
Never lie about the information you give the potential buyer. One way or another, the truth will come back around. If you’re having issues, tell the truth, and offer a solution.
Get a Grip on Your Finances
When looking at all the businesses for sale in an area, you’ll notice many are being sold due to unorganized finances and poor bookkeeping. Get a grip on the numbers.
Even if you don’t have the tools or resources to save the restaurant yourself, do what you can to organize the books so you aren’t handing off too large of a mess to the new owner. Work with an accountant if you need extra assistance.
Do you notice any loose ends? Before selling off the restaurant, tie up loose ends where you can.
Contact a Business Broker
Not many people can say they know how to sell a company. Business brokers do. Get in contact with one to keep the ball rolling in the right direction.
They’ll have a list of contacts to reach out to for leads on buyers. To be more specific in your search, hire a business broker with experience and a specialization in selling restaurants.
Brokers are large investments, but they’ll most likely be able to sell your restaurant at a much higher price than you could on your own. Plus, they take the extra stress off your back.
Remain Rational and Logical
Selling something you worked hard to create is emotional. You’ll go through waves of sadness, disappointment, happiness, and relief. It’s a rollercoaster ride.
Recognize your emotions, but remain logical throughout the selling process. Don’t let the emotions get to your head. Do your best to steer clear of cold feet.
If the stress and anxiety are too much, seek out a therapist. Even if it’s only for a short time, a trusted therapist will help you work through what you’re feeling.
Refrain from dragging your employees into the emotions. They may also be sad, especially if they’re left without a job.
Learn How to Negotiate
Did you decide to do without a broker? Spend time learning the psychology of negotiation. It’s crucial.
Smart and experienced buyers will do their best to push down the price. Depending on how good they are, you may not even realize they’ve lowered their asking price to an unfair level of low.
One written or verbal error on your end can wreck a big deal. Be thoughtful with your pitch and offers.
Place an Ad
If you’re having a difficult time selling your restaurant, it’s time to place an ad. Head on over to Google, a local newspaper, or even Facebook.
Advertise your restaurant, and always provide contact information. Take time each day to sift through any emails or phone calls you’ve received regarding your offer.
Keep an open schedule to meet with potential buyers. Give them a short tour of the restaurant, answer any questions, and ask about their experience owning a restaurant. Be friendly and professional.
Before giving a tour, remember first impressions are key. While you might be in the middle of renovations, do your best to keep the place clean.
Trust Your Gut
Until the papers are signed and the money is paid, the restaurant is yours. Take care of it.
Trust your gut and intuition throughout the selling process. If an offer seems too low, it’s too low. If a buyer doesn’t seem like they’re a good fit, they’re not a good fit.
Seek out a business coach and trusted friends if you need advice and reassurance.
Let It Go: How to Sell a Restaurant
Hiding under the stress and work it takes to keep a restaurant afloat is especially overwhelming as you learn how to sell a restaurant. Hopefully, our guide above provided clarity.
Perform maintenance and touch-ups before advertising the space. If you need help selling the company, reach out to a business broker. No matter what, always trust your gut through the process.
Are you not sure where to turn to find a trustworthy business brokerage? Look no further than our site. Contact us today for the help you need.
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How Understanding Psychology Can Benefit Your Deals
We work closely with our clients to preserve the integrity of deals so that they have the best chance of a successful closing. An often-overlooked aspect of the process is understanding and embracing human psychology. In this article, we will explore some of the most common ways that psychology comes into play.
The Element of Time
It is critical that both buyers and sellers feel well prepared at every stage of the process. It is also essential that a certain momentum is established through every stage of the deal. When too many delays happen, this can start to derail deals.
Think about the Buyer and the Seller
For both parties, the buying or selling of a business is a life-changing event. For this reason, it is important that you invest the time to think about the point of view of the other people involved. No doubt, buying and selling can be stressful, so it’s important to take other people’s thoughts and feelings into account. You are not the only one who may be experiencing a little stress.
The Issue of Non-Active Partners
In some deals, non-active partners can pose challenges to finalizing deals. They often have different motivations than the seller who is in the role of running the business. In a situation where two sellers have divergent goals, it can pose a challenge to a deal. The best thing to do is to try to understand the point of view of each seller and help them both reach their respective goals.
Identify Influencers
Influencers and recommenders can have a powerful sway over both buyers and sellers. By influencers, this could mean accountants, lawyers, relatives, etc. In order for a deal to go through successfully, often these influencers must be identified and their viewpoints must be addressed. On a practical level, there are also other people involved that can interfere with a deal, such as landlords. It’s important to make sure that these individuals feel as though they will benefit from the success of the deal as well.
There are many moving parts needed to get to the finishing line. Human psychology plays a huge role in what decisions get made. It’s vitally important to take the time to consider what others involved in the deal might be thinking or doing. Your Business Broker or M&A Advisor will benefit you by getting to know all parties involved and taking the appropriate actions to ensure things are done to the satisfaction of all parties.
Copyright: Business Brokerage Press, Inc.
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6 Signs It’s Time for You to Sell Your Business
Entrepreneurship is a risky business. While starting your own business venture can be one of the most rewarding experiences in your life, it can also be one of the most stressful. The reality is that not all entrepreneurships are made to last, and only a handful of businesses truly stand the test of time.
With this in mind, it’s always important to know when to move on and sell your business. In some cases, a struggling business may not be worth holding onto. Or you could be offered an opportunity of a lifetime in selling. But the real question is, how do you when the time is right?
This blog highlights the top signs it’s time to sell.
1. Entrepreneur Burnout
There’s no doubt that owning and running your own business is a full-on experience. Not everyone is cut out to be an entrepreneur, either. It takes a certain type of motivation and dedication to make a true success of your entrepreneurial goals.
Whatever your reason is for burnout — whether you’ve given it your all and have nothing left in the tank, or want to pursue another type of career, you need to honor your fatigue.
What others see at surface level when you’re an entrepreneur is only the tip of the iceberg when it comes to running a business. If you feel like you’ve done your time working grueling, long hours, and managing stress, there’s no harm in moving on.
Knowing when to call it quits takes just as much gumption as it does to start a business. And when it comes to burnout, you have far more to gain than to lose when selling a business.
At the end of the day, owning and running a business should be a fulfilling and motivating experience. If it’s not, you may need to consider moving on.
2. Excessive Business Risk
Here’s a sliver of reality for you: up to 50 percent of small businesses fail in the first five years of operation. As depressing as that sounds, it’s the reality of how risky it is to start and manage a business today.
If you’ve made it past the five-year mark, you’re already ahead of the curve. But what happens when your business success starts to slow down? There may come a time when your business growth comes to a plateau and the risks begin to mount against you.
Do you soldier on and hope for the best? Or do you accept when it’s time to fold and sell your business? Ultimately, it’s no easy decision. But if your gut is telling you that there are too many heavy clouds on the horizon, selling your business in the right timeframe could save you from disaster down the line.
3. An Offer of Purchase You Can’t Refuse
In some cases, the opposite of the above might happen, and your business could grow from strength to strength over the years. You may have dedicated your time to growing your business slowly while operating with a frugal budget.
Often, this gives way to a business that increases in value and captures the attention of other entrepreneurs and business investors. To add to this, your business could fall into a particular niche that grows in popularity over time.
When you’re offered a decent acquisition price, you could walk away with a decent profit. Or, you could walk away with an incredible profit that allows you to begin a whole other business venture. In this case, this might be a good time to sell!
4. You No Longer Have the Power to Compete
It’s no secret that the world of business seems to change at the flick of a switch these days. With the advent of all things digital, this is where many businesses may find themselves unable to compete in certain industries any longer.
Most businesses today can no longer rely on the traditional means of running an operation. If your business has not been able to scale to the demands of the market and industry trends, you could find yourself lagging dangerously behind.
If this is the case, your product and services could become obsolete. As a result, you may not have the power to compete with local competition any longer. Your business model could crash and you may not be able to stay afloat.
While it may be a difficult pill to swallow, it’s crucial to face reality and know when it’s time to move on.
5. Your Own Aspirations Change
There’s no shame in admitting that a business you once had an undying passion for just doesn’t do it for you any longer. Your professional aspirations may change over time, and that’s normal.
On the other hand, you may also realize that you’re not cut out for a certain industry or even owning a business altogether. Whatever your personal situation may be, it’s better to be honest with yourself.
It’s also not the end of the world if you started a business and decide to sell it down the line. Think of it this way — it could provide you with some form of capital to pursue another professional venture.
6. The Circumstances of Life and Retirement
When it comes to business ownership it may feel like your work priorities consume all of your time and energy. While this is a common reality of owning a business, it shouldn’t get in the way of your family priorities. However, this is often easier said than done.
But, there may come a time when your personal circumstances change and your priorities have to shift. For example, a family member could fall ill and need your full attention. You could become a parent and your family will take top priority. Or maybe you’ve served your time in the business world and want to wind down into retirement.
There are a number of personal reasons and life circumstances that could spur the sale of your business. You are not a failure in this case. You have chosen to prioritize yourself and your family — and what could be more important than that?
Is it Time to Sell Your Business?
Making the decision to sell your business may be one of the toughest decisions you’ll ever make. It may feel like your life’s work is coming to an end, but in some cases, it could be the best decision you ever make, too.
If you’re in need of professional expertise on how to sell your business for the best price and on the best terms, then Fusion Advantage is your go-to. Selling your business for what it really deserves can make the entire process much easier to accept!
Learn more about our services, here.
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