B.A. Boss offers a small guide so that business or company owners can better prepare in case they want to sell their companies. In Spain it is estimated that in the next 5 years there will be some 400,000 companies for the succession, or to be sold or closed. Unfortunately the biggest part ends with a closure: almost a million (!) companies have decommissioned in the last 10 years. This is the fifth and last of 5 articles in which we give a little more detail to the process of a sale.
5- Final questions and doubts about the sale of the company How long does it take to sell a business? It generally takes, on average, five to eight months to sell most businesses. Keep in mind that this is just an average: some businesses will take longer to sell while others will sell in a shorter period of time. The sooner you have all the information you need to start the sales process, the shorter the period should be. It is also important that the business is priced correctly from the start. Some sellers, based on the premise that they can always lower the price, overvalue their company. This theory often fails, because buyers tend to reject overpriced prices. It has been shown that the input required can be the key to a quick sale. The lower the asking price, (usually 40% of the total price or less), the shorter the time to a successful sale. A reasonable down payment also tells the potential buyer that the seller has confidence in the business's ability. Why is seller financing so important to the sale of the business? Surveys have shown that the seller who asks for all cash receives an average of only 70% of the asking price, while sellers who agree to collect in installments receive an average of 86% of the price. That's a 16% difference! In many cases, all-cash businesses rarely sell. However, with reasonable terms the chances of selling are greatly increased and the sales period shortened. Most sellers are unaware of the success they can have in financing the sale of their business. In some cases it can greatly increase the price received. And, as we've said, it tells the buyer that the seller is pretty confident that the deal can pay for itself. What to do when there is a buyer for your company? When a buyer is sufficiently interested in your business, they should make a written offer. This offer or proposal may have one or more contingencies. These generally refer to a detailed review of your financial records and may also include a review of your rental agreements, franchise agreement (if there is one), or other pertinent company details. You can accept the terms of the offer or you can make a counter offer. You should understand, however, that if you do not accept the buyer's offer, the buyer can withdraw it at any time.
On first review, you may not have a particular offer; however, it is important to treat it carefully. It may lack some parts, but it might also have some points to seriously consider. There is an old saying that says, “the first offer is usually the best the seller will receive.” This does not mean that you should accept the first, or any, offer - just that all offers should be carefully considered. When you agree with the buyer, both of you must work to satisfy and review the conditions or eventualities of the offer. Much cooperation is important in this process. You don't want the buyer to think you're hiding something! At this point, the buyer can bring in outside consultants to help review the information. When all the conditions have been met, the final documents will be drafted and signed. Upon closing, payment will be made and the new owner will take possession of the business. What to do to help sell the business? The buyer will want up-to-date financial information. If you use accountants, you can work with them the current information available. If you use a lawyer, make sure they are familiar with the closing process. If you and the buyer want to close the sale quickly, usually within a few weeks, unless there is a license that might delay the process, you don't have to wait. The time factor is at the heart of any business sale transaction. Failure to close on time allows the buyer to reconsider or make changes to the original offer.
What is the role of brokers or intermediaries? Brokers or intermediaries are the professionals who will facilitate the successful sale of your company. It is important that you know what a professional intermediary can do. It can help you decide how to value your business and how to structure the sale. They can find the right buyer for your business, work with you and the buyer on the negotiation and other steps until the transaction is successfully closed. It can also help the buyer in all the details of the business buying process. A broker is not, however, a magician who can sell an overpriced business. Most businesses are salable if they are priced and structured correctly. You must understand that only the market can determine how much a business will sell for. The amount of down payment you're willing to accept, along with the seller's financing terms, can go a long way in determining not only the final sale price, but also the success of the sale itself. How to promote the sale of your company? There are online platforms that can help you promote and announce the sale of your company, to find potential buyers in a faster and more efficient way. Brokers or intermediaries use these Internet portals to publish the offers of companies and businesses for sale or transfer that they have in their portfolio, and thus speed up the process of contacting potential buyers and closing the sale. In the past weeks we discussed the other 4 steps needed to prepare for a business sale. If you want a copy of the full article, click here.