10 Most Asked Questions About Selling a Business

Question 1: What are the major reasons for selling a business?

Answer: The reasons for selling a business will vary from one extreme to the other. Most buyers will ask at the initial meeting what your motivation is for selling. There can be very good reasons for selling, death, new venture opportunities, partnership issues, divorce, illness, retirement, etc.

Question 2: Who is the best qualified person to sell your business?

Answer: The Joerling Group, Your Real Estate Professional and YOU!!! Only one person knows what your business is all about—and that’s you, the owner. You have all the knowledge about your company that a buyer requires. You know the strengths and weaknesses of the company operations as well as the cash flow. Together with your CPA and attorney and possibly a commercial appraiser we should be able to determine the right price for your business. We will maintain confidentiality, work together to price it right and find qualified buyers. You may want to think about staying on for a short period of time to act as a consultant to assist the new buyers especially if you are contemplating leaving some financing in the business to assist the buyer(s).

Question 3: What does a seller need to know about a buyer?

Answer: Once you have decided to market your business, we need to qualify the perspective buyer(s). How much available cash do they have for the down payment as well as working capital and inventory purchase? Is there credit such that they can qualify for a credit line for working capital as well as a term loan for the purchase of your assets and land/building?

Question 4: What will a buyer look for in your buiness?

Answer: Verification, verification, verification of everything that you state in your business books. Simple enough, make sure you have proper documentation of your income, purchases, business expenses, etc. just as if you were purchasing it yourself again! The buyer will want to see at least three (3) years of prepared tax returns including schedules as well as current profit and loss statements showing year to date income and expenses. A company balance sheet is also required showing current assets and liabilities. These forms are required by the buyer’s banker as well.

Question5: What is the purpose of your data sheet?

Answer: Buyers will need to have a snapshot of the company, ownership, location of all offices, management in place as well as equipment lists and vendor and suppliers.

Question 6: What will you go through when selling?

Answer: You will need financial numbers for at least 3 years. It is even better if you have it for 5 or more years so that the buyer and their banker can see the historical data and track record of the business itself. These records should reflect and point out when new products were introduced and marketed, cancelled, etc. that may have affected annual sales. If you have the data monthly or quarterly that would be extremely helpful to buyers. Their banker is most likely going to ask the buyer to prepare a 3 to 5 year projected income statement by month taking into account the new loan that they are requesting from the lending institution. The past historical data is critical in the preparation of that business plan. The buyers will need to know your inventory adjustments as well as depreciation methods.

Question 7: How do you determine the price of your business?

Answer: You should work closely with your accounting firm and banker to determine the value of your business. You should take into account all your assets that are going to be involved in the actual sale. Is there real estate, inventory, personal property, office equipment, patents, goodwill (that invisible valuable asset), accounts receivables, vacant land, vehicles, etc. in the sale? Don’t underestimate the value of the business! But remember you ARE THE BUSINESS in a lot of respects so there is difficulty in determining what will happen when you leave and the new buyer comes in and takes over the operation.

Question 8: What kind of buyers can I look for?

Answer: There may only be a handful of qualified and experienced buyers or there could be a multitude depending on the type of business you have. If there is real estate involved in the transaction, the buyer may have a totally different use for that land and building than how you currently use the property. What use to be a gasoline station may be razed and made into a strip mall. If we find a buyer that wants to continue your operation and same line of business, then we want to determine what qualities that buyer must possess in order to continue that reputation and delivery of service/product.

Question 9: How does the buyer get financing?

Answer: There are various forms, most traditionally there would be your local bank financing. Sometimes it is a combination of some owner financing, bank financing and perhaps even SBA Small Business Administration financing. The buyers may even have to pledge a 2^nd or 3^rd on their personal residence to qualify for the loan depending on the amount and value of your assets that are being sold.

Question 10: What else should I know about?

Answer:

• Selling a business takes a while
• Not everyone is cut out to be self employed
• You must make full disclosure of everything and have it documented properly
• Be prepared to keep some money in it to assist the buyer
• Have your inventory and assets up to date to ease in the sale
• Make a detailed list of all your equipment including serial numbers
• Keep working hard at your business to keep the revenue stream up