Q )When is the best time to start preparing for the sale of your business?
A) The day that you start the business. Preparing your business for sale is a mindset, and it's never to early to start preparing for that day. That old saying about working "on your business, not in your business" is especially true if your goal is to sell. If you are working "in your business", then all you have to sell is a job. By working on your business, you have put systems, processes, and people in place so that you, as the owner, can grow the business. This allows for a smooth transition from one owner to the next.
Q) How long will it take for the sale to take place?
A) This is a question that every owner wants to know, but there is no way to answer it. The majority of business sale listings that are posted on the internet never sell! At Tri State, we only accept quality businesses into our inventory that we believe we can represent well and sell quickly. A profitable and solid small business can take over a year to find a buyer and close the sale. Many times, the buyer will not have the funds available for the purchase, and will need to seek financing. This can take months, especially when dealing with the Small Business Administration (SBA)
Q) How much will my business sell for?
A) Many sellers have no idea of the value of their business, or they believe it to be worth much more than it actually is. Buyers want to see financial statements. Although the seller may have worked very hard, and invested a significant amount of money, buyers only pay for results. Our firm works diligently to determine the true value of the business. We analyze recent tax returns, balance sheets, and P & L's to determine the owners discretionary income. We research what similar businesses have sold for, and use a sophisticated industry software system to determine the value. Ultimately, it is only worth what somebody will pay for it.
Q) I want to get all cash for my business and retire. Do I need to offer any financing?
A) A seller doesn't have to finance any portion of the business, and never has to accept an offer they are not comfortable with. However, it is much easier to market and sell the business if a seller is willing to finance a portion of the sales price. Usually, the business will sell for a higher amount when the seller offers financing also. Most buyers will need to get outside financing for the purchase. A lender is far more likely to lend the money if the seller is also willing to hold a note. It shows faith in the business. Generally, the interest rate that the seller charges is higher than the outside lender.