Important Q&A

What affects the selling price?
How will my business be advertised?
What do I need to do to help sell my business?
Can you sell my business?

What affects the selling price?

TERMS Several factors come into play and can affect the sales price. One of the most critical is the 'terms' or the amount of down payment and the amount financed. Over eighty percent of all businesses sold above $100,000 are sold with 25% or less down, 50% bank financing and the owner financing the balance. Asking for one-half down will reduce the price by approximately twenty percent. Asking for cash will reduce the price to about forty to sixty percent of the amount attainable with twenty five percent down. Down payment or the 'terms' is a key factor, because a buyer is trying to buy as much business as possible for the money available for down payment. So, when a seller asks for $200,000 down on a $400,000 value business, buyers prefer to continue looking until a $600,000 value business is found where the owner will accept $200,000 down and finance the balance. The seller who asks for all cash or a large down payment is not going to succeed in obtaining the full fair market value of their business, because buyers know they can buy three times as much business for the same investment. In a nutshell, high percentage down payments cause buyers to discount offers.

PRESENTATION A second critical factor is the quality of the information provided to a prospective buyer. The value of the assets and cash flow generated by the business must be provable and verifiable. A Neumann & Associates will be able to assist the business owner in arriving at these values.

MULTIPLE OFFERS The third most important factor that effects the sales price of a business is whether there is competition among prospective buyers for the business. Competition creates higher selling prices, as we all know from basic economic principles. A buyer who knows he has other buyers competing for the business will be motivated to offer the price being asked to ensure he does not lose the business to another buyer's better offer.


How will my business be advertised?

The advertising of each business will depend upon the size and type of business. BBN Affiliate Brokers use several media to solicit prospective buyers, including local and national newspapers, including the Wall Street Journal, trade publications and the internet. In addition, qualified buyers from other affiliate offices comprising more than 1,000 individuals, corporate acquirers and investment groups. Local newspapers are used as little as possible, because it is often more difficult to protect confidentiality when a business is advertised locally. Affiliates also use other top business listing sites on the Internet.


What do I need to do to help sell my business?

The first thing you need to do is offer the business at a realistic price and with reasonable terms. You need to provide as much information as is possible to the broker so a professional marketing package, including a business profile, can be prepared on your company. The quality of the business profile will greatly enhance the 'saleability' of a business. A package prepared by A Neumann & Associates will contain the financial, operational and historical information about the business. Informed buyers make better offers. Other things a seller can do are:

Continue to run your business in a normal manner.

Keep the business clean and organized (on paper and in person), so potential buyers will like what they see.

Liquidate or set aside obsolete inventory and unneeded equipment before you place the business on the market.

Notify your broker of any material changes in your business.

Forward monthly financial statements to the broker as soon as they are completed. This will keep your marketing package current.

Do not meet with potential buyers without your broker being present.

Avoid direct negotiations.


Can you sell my business?

A broker cannot really sell a business, because he or she does not have the intimate understanding of the business and its operations, and certainly not the level of knowledge the owner has. Therefore, a professional broker's initial job is to get a business listed at the best possible obtainable price and with realistic terms of sale. The next job is to qualify buyers to keep the seller from wasting time with people who are not financially qualified. Qualified buyers will be presented your business profile after they have completed a Buyer Warranty and Confidentiality Agreement that protects the confidentiality of the seller regarding the potential transfer. The broker will then schedule a meeting between the business owner and the interested buyer after preparing the seller accordingly. During this meeting, the business owner will explain the business to the buyer. After this meeting, the broker will work to get a written offer to purchase. The broker will present all offers and after acceptance will coordinate the due diligence process that will lead to the closing.