Q: How long will it take to sell my business?
A: The time needed for sale depends on a great many factors including the price of your business, the type of business, and your willingness to finance the buyer. In general, it takes six months to a year or longer to find a buyer for a business and close the sale. The price and the terms you are offering are important factors. The more reasonably priced and the better the terms offered, the faster the sale. Your Sunbelt broker can discuss with you how your business fits into these general guidelines.
Q: How will my business be advertised?
A: We first market to our large database of qualified buyers. We advertise on the Internet, on the Sunbelt site and on several other business listing sites (BizBuySell, CABB, SunbeltNetwork, BusinessBroker, BizQuest, BizBen are a few examples) giving your business exposure to thousands of Internet users. Since Sunbelt has over 230 offices, your business will have exposure in all areas of the country as well as the 11 countries we have offices. Many buyers will relocate for the right business.
For specific businesses, we do target marketing to companies approved by the Seller. This is when we go after strategic buyers or Private Equity Groups (PEGS) who want to acquire companies within your industry.
Q: How will I be protected on the financing I provide to the buyer?
A: The escrow company will prepare a promissory note, a security agreement and will file a UCC-1 financing statement with the appropriate local and state agencies. It is much like financing a car—your lien will be recorded in the public records, and the assets listed on the UCC-1 cannot be legally sold or refinanced without your permission. Should the buyer sell the assets without your permission, it would be a felony offense.
Q: Will the buyer pledge any additional collateral for my loan?
A: Buyers do not typically pledge additional collateral for your loan. When a buyer buys your business, he/she does so based on the business being able to generate sufficient cash flow to pay your loan and provide him/her with cash flow to meet their needs. When you ask for additional collateral, you are sending a negative message to the buyer: the buyer has paid too much for your business and the business will not generate enough cash flow to pay your loan and provide adequate cash flow to the buyer.
Q: What types of offers should I expect to receive?
A: An astute buyer is going to structure the initial offer to insure that they get the best possible price and terms from you. Therefore, you should expect to receive a “low” initial offer. Don’t be offended – this is just an initial offer to “test the waters”. If you are asking $400,000 for your business, a prudent buyer may offer $330,000 as the initial offer. The buyer does not expect you to take the initial offer, nor should you expect the buyer to accept your initial counter offer.
Since the market is strong now and businesses are showing 3 years of growth, we are finding many multiple offers. When this occurs the offers are typically higher because the buyers are competing to get your company and will tend not to come in as low since they know there are other offers. All offers that you receive will have some contingencies.
Generally, these contingencies concern review of the financial information, obtaining a satisfactory lease and agreement on a training and transition period. Another contingency is to obtain funding. Other contingencies specific to your business may be included. Contingencies are normal and provide the buyer with the ability to “check out” the business before closing.
Q: How long is the training period for the buyer?
A: Generally, you will be expected to provide two weeks to two months training in the business with an equal time of telephone consultation. Remember, you still have an investment in the business, so properly training the buyer is in your best interest.
Q: Will I have to sign a non-compete agreement?
A: Yes. Generally, the non-compete agreement covers the area from which your current customers are generated and the time period usually equals the term of the financing you are providing to the buyer. For example, if your customers come from a three mile radius of your business and you are providing the buyer with a five year loan, you will be asked to sign a non-compete for a five year period covering a three mile radius from your business.
Q: When should I tell my employees about the sale?
A: Although it sounds cruel, our considerable experience has proven that it is best to tell your employees about the sale after the sale is complete. Of course, if there is an employee whose expertise will be needed after the sale, you should introduce the buyer to this employee shortly before closing. Your Sunbelt intermediary can assist you in determining the timing for notifying employees.
Q: Does Sunbelt financially qualify the buyer?
A: No but we do screen the buyers. We ask for a personal financial statement from the buyer, but we do not verify the information submitted. We do not run credit reports on buyers. It is the Seller’s responsibility to do whatever you feel is appropriate regarding qualifying the buyer. Generally, if the buyer has sufficient funds for the down payment and for working capital, that is adequate qualification. In our Asset Purchase Agreement it states under Seller’s Due Diligence that the Seller will require a credit report.
Q: What can I do to help sell my business?
A: As Sunbelt begins the process of selling your business, there are certain things you can do to help us.
• Keep normal working hours.
• Do business as usual. Do not let inventory levels dip below normal.
• Keep the business clean and in good repair.
• Remove equipment or furniture that is not part of the sale.
• Provide us with required information in a timely manner.
• Be as accommodating as possible in setting appointments to meet with buyers.
• Work with us and not directly with potential buyers. Always refer buyers to us. You hired us to sell your business, so let us do our job.
Remember that a negotiated deal is a deal that will close. Do not become offended by what you consider to be a “low” offer. Counter all offers on a timely basis.