Are You Buying (or Selling) a Business?

Are you considering purchasing a business? Here are some basic pointers to get you started.  Incidentally, this article should also be of interest to anyone thinking of selling their business. At Provest Properties, we've found that the process becomes easier when both the buyer and seller have information and knowledge. What's the Profile of a Typical Buyer? The typical small business buyer is often looking to get out of an uncomfortable job situation or deal with a lost job.  Most of these buyers have never owned a business. A buyer will more than likely have less than $100,000 in which to invest in the purchase of a business.  More than 70% of buyers will have less than $250,000 to invest.  A buyer's funds will usually come from personal savings and additionally from family members. Potential buyers are looking to do their own thing and they want to break free from the cycle of working for someone else.  While making money is on their priority list, this typically isn't the … [Read more...]

What Can Make a Deal Fall Apart?

It goes without saying that from time to time, deals do fall apart.  However, when both buyers and sellers understand potential pitfalls, they are more likely to be overcome.  Let's take a look at some of the more common reasons why this happens.  The following is a compilation of factors taken from a survey of business brokers across the United States. The Seller Doesn't Reveal Problems  In some cases, a seller simply is not upfront about problems facing the business.  These issues do show up later, and this often occurs after a tentative agreement has been reached.  The buyer ends up getting cold feet and the deal falls apart.  The way to solve this issue is that sellers must be upfront about any negative aspects facing the business.  Ar Provest, we attempt to ferret out problems at the beginning of the process; there are steps that can taken to overcome these issues. Second Thoughts About the Price  Another reason that can cause a sale to fall apart is when a buyer … [Read more...]

Why should you consider seller financing?

In today’s marketplace, a seller should expect to finance some portion of the sale.   Financial institutions today are asking for sellers to take back some piece of the sale price, especially if the intangible portion of the sale is an unusually high percentage of the price.  When reasonable terms are set up, the chances of selling increase and the time period to sell decreases.  Many sellers don't realize how much interest they can receive by financing some or all of the sale of their business.  In some cases, the amount received greatly increases. One important point that is easy to overlook is that allowing for seller financing tells the buyer that you have confidence that the business can, indeed, pay for itself.  Of course, not all sellers are in a position to carry.  Each situation must be analyzed and reviewed.  At Provest, we can help you make the right call. … [Read more...]

So I have a buyer for my business- what happens now?

When you have a potential buyer, the first thing to expect would be to get an offer in writing.  When you look at this proposal, you may find contingencies, which deal with a detailed review of your financial records, financing and/or environmental issues.  Your buyer may even ask for details of your lease arrangement, and franchise agreement when applicable.  At this point, you can accept these terms or make a counter offer. Of course, if you do not accept the buyer's proposal, he or she can withdraw it at any time.  Even if you aren't pleased with the offer you've received, you should look at it carefully.  Even if it’s lacking in some areas, it might have other advantages, so don't disregard it too quickly The next step of the process takes place once you and the buyer are in agreement.  At this point, you will need to satisfy and remove any contingencies.  You and the buyer must cooperate during this process.  Otherwise, he or she may feel you're hiding something.  Don't be … [Read more...]

Is there something I can do to help sell my business?

It goes without saying that a buyer will want up-to-date financial information. Work with your professionals to make all current information available.  Make sure that your attorney is familiar with all laws and the business closing process.  If you have an attorney, you may also want to check to see if he or she could participate at a closing on short notice.  You wouldn't potentially want to have to wait for an attorney to make the time to prepare documents or attend the closing.  When it comes to any business sale transaction, time is of the essence.  When parties don't close on schedule, the buyer could reconsider or make changes in the original proposal. … [Read more...]

What are business brokers and what can they do?

Great question! Business brokers are professionals that will facilitate the successful sale of your business.  However, there are certain things business brokers can and cannot do.  For example, they can help you price your business and structure the sale.  They can also assist you to find the right buyer and negotiate effectively with that party.  Business brokers can also help buyers to successfully purchase a business. Keep in mind that business brokers are not magicians, and this means that they can't sell overpriced businesses.  If your business is structured and priced accurately, chances are that it can and will sell.  However, only the market will determine what a business will sell for in the end.  There are a variety of factors that can influence a sale including the amount of the down payment you'll accept as well as the terms of the seller financing. … [Read more...]

How long should I expect it to take to sell my business?

In short, the answer to this question depends on many factors.  In general, 80% of businesses close within 12-14 months of listing.  Keep in mind that this figure is just an average.  However, if you get together the information needed to begin the marketing process, the overall time period will decrease.  Pricing your business properly from the start can also make a big difference. While some sellers want to overprice their businesses with the idea that they can always come down in price, this strategy usually backfires.  Many buyers won't even look at overpriced businesses.   Another aspect that can be a key ingredient to a quick sale is the down payment.  When a down payment is lower, the time to a successful sale is typically shorter.  When there is a reasonable down payment it also tells a buyer that the seller has confidence in the business’s ability to make the payments. … [Read more...]

Should I Get an Attorney?

Our clients often ask us if they should get an attorney to assist in the buying process.  It is a good idea to have an attorney review your documents.  However, make sure that this attorney is familiar with the process of buying a business.  You will also want to select someone who can accomplish the process  in a timely manner. We have recommendations of qualified attorneys with ample experience helping buyers through the process.  Keep in mind that while your we are extremely knowledgeable about the process, we can't give you legal advice.  On the other hand, many attorneys aren't qualified to give business advice. While, of course, you will want your attorney to look out for your interests, keep in mind that throughout the process the seller's interests must also be protected.  A seller's attorney could instruct him or her not to proceed if it seems that the seller's interests aren't being considered.  Obviously, any transaction should be fair for both parties. If you are … [Read more...]

Do I need a business broker?

How can Provest help you buy a business?  First of all, we can give you an array of businesses to choose from and in many cases you wouldn't have found them on your own.  It is important to note that 90% of the time, business buyers end up with something other than the business they first inquired about. It should go without saying that we can also give you a lot of information about the buying process and small businesses in general.  We are entrenched in the market and can give you invaluable information about trends, pricing and even local considerations. Throughout the sale, we handle the fine details.  If it is necessary for other professionals to assist you in any way, we can give you recommendations. All in all, you can share your business needs and requirements with Provest, and expect to get results. … [Read more...]

I have found a business I want to buy, what now?

It is at this stage that Provest can be quite invaluable.  We will be there to answer any questions you might have or do the relevant research.  Next, we will prepare an offer based on the price and terms you feel are appropriate.  Typically, you will have final approval upon review of the actual books and records supporting the figures that have been provided.  You will find out at this stage if the buyer will accept the price and terms you offered. It is essential that you and the seller agree on price and terms. When the seller receives your offer, he or she can approve it, reject it, or counter it with his or her own offer.  If you receive a counter proposal, you can accept or reject it. Once a price and terms have been agreed up, “due diligence” is next.  The burden is on you – the buyer – no one else.  You have the opportunity to bring in outside advisors or do your own due diligence.  If there are no areas of concern, you can allow the closing documents to be prepared and … [Read more...]

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