- 13 Points to Keep in Mind
- 9 Reasons to Use a Broker
- Initial Consultation
- Listing
- Marketing
- Offer
- Due Diligence
- Escrow
- Closing
13 Points to Keep in Mind
Be realistic. If your price is too high, qualified buyers may be scared away or not make an offer for fear of offending you. You lose time. And the longer the business is on the market, the more negative the "word on the street" becomes, and the greater the chance your employees, suppliers, lenders or customers will find out. Look for comparable sales and price your own business within that range.
Be honest. Misrepresenting or withholding material information not only is against the law, it will lead to delays, bad feelings, a possible collapse of a sale, and possible exposure to a lawsuit even years after the sale.
Prepare an offering package. You were a buyer yourself at one time. You know how many questions you needed answered satisfactorily before you were ready to buy. So prepare the documents and information in advance. That way, you won't lose interested buyers due to slow response times or inaccurate information.
Prepare your books & records. The #1 reason for businesses not selling is poor books and records. Your buyer will want to see them. Your buyer's lender will demand to see them. Best to prepare the books in advance, then market your business from the outset based on supported numbers. There is nothing that will waste more time, create more bad feelings, and cost you more serious buyers than surprises that come mid-stream.
Assess the transferability of your lease. The #2 reason businesses don't sell is an inadequate lease or uncooperative landlord. If your remaining lease term is short, negotiate a new lease prior to offering your business for sale.
Do your repairs now. You would not want to buy a business with deferred maintenance or non-functioning equipment. Neither will your buyer. You will have to fix it or pay for it eventually. So do it up-front, before prospects see problems and wonder about the condition of things they can't see.
Set aside time. If you decide to sell the business yourself, plan for the time it will take. It will take far more time than you expect, time that you will have to take from running your business. To be effective, you will need to take calls at all hours, meet with prospective buyers when they are available, qualify them, and be prepared to handle their questions.
Market to as wide an audience as possible. Don't depend only on your local paper. Only a fraction of readers are in the market at a given time. The way to get the optimal price is to have as many qualified buyers as possible.
Qualify buyers right away. Check for proof-of-funds, creditworthiness, experience, and more. There is no greater waste of time for buyer or seller in being several months into a purchase only to discover the buyer does not have the down payment promised, the experience to qualify with the landlord or franchisor, or the legal status to obtain the necessary licenses and permits. Qualify the buyers before you give out confidential information or spend a lot of time on them.
Get everything in writing. People quickly forget what was said, and new people become involved over time. Not getting everything in writing leads to arguments and then lawsuits.
Prepare a purchase agreement form in advance. You can then fill out the blanks when you have a deal. Attorneys are sometimes very slow in putting agreements together, and your buyer's enthusiasm may evaporate before it is completed.
Require a substantial deposit. An offer without consideration cannot become a contract. The deposit should be held by a neutral escrow holder to limit your liability.
Protect yourself. If you are carrying back part of the purchase price, be sure to follow the correct procedures to protect your note. These include filing of a UCC-1 statement, suitable promissory notes, security agreements, etc.