Monday, November 10, 2008

Buyers and Sellers of Businesses Q&A

Why should I buy a business rather than start one?The failure rate in small business is enormous in the start-up phase and the first three years. The existing business has demonstrated that there is a need for that product or service in a particular location. Financial records are available along with other information on the business. Most sellers will stay and train a new owner and most will also supply financing. Finding someone who will teach you the intricacies of running a business and who is also willing to finance the sale can make all the difference.

What is the real reason people go into business for themselves?Most surveys taken reveal the same responses, in almost the same order of priority. Here are the results of a typical survey, listed in order of importance:
To better my life and control my own destiny.
Don't want to work for someone else.
To better utilize my skills.
To make money.
Immigration regulations require the purchase of a business to receive residency status in the United States.

Why should I go to a Business Broker?Selecting the right, experienced broker for YOU is of utmost importance. Your broker will carefully study your strengths and shortcomings, experience, needs, likes and dislikes and will provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own, that better suit you.
Business brokers are also an excellent source of information about businesses and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business broker will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting with other professionals who may be able to assist you.

How are businesses priced?Although supply and demand will ultimately effect the price of a business, there are "rules of thumb" or formulas used to arrive at the proper market value. Your business broker will explain that a review of financial information will be necessary before a price or range of prices may be suggested. Most sellers have some idea about what their business should sell for - and this is certainly taken into consideration. However, the business broker is familiar with market considerations and, by reviewing the financial information, can make a recommendation of what he or she feels the market will dictate. A range is normally set with a high and low price.
Since a large number of business sales are seller-financed, the down payment and terms of the sale are very important. In some cases, how the sale of the business is structured is more important than the actual selling price.

What does it take to be successful?
Certainly, you need adequate capital to buy the business and to make the improvements you want, along with maintaining some reserves. You need to be willing to work hard and, in many cases, put in long hours. Too many people believe they can buy a business and sit behind their desk and work on business plans. Business owners must be "doers."

What happens when I find a business I want to buy?When you find a business, your business broker will be able to answer many of your questions immediately or will research them for you. Once you get your preliminary questions answered, the typical next steps that your broker will guide you through are:
Submit an offer
Receipt of seller's acceptance or counter offer
Negotiations to firm a contract for sale & purchase
Recommend professionals to assist you performing your "due diligence"
Preparing documentation for the proper lease assignment for the premises, when applicable
Organize preparation of closing documents
Review of closing documents
Closing the transaction

What area do you support for me and why?
We handle businesses anywhere in the state of Florida with particular emphasis on Central Florida, Orlando and surrounding area. This area has absolutely ideal climate conditions, tax advantages, low crime and affordable housing. This is one of the fastest growing areas in the United States. The future for small business activity in this area is exceptional.

Why should I employ GOLDCREST COMMERCIAL?What we do for you - The Seller:Goldcrest will thoroughly evaluate your business and give you a clear explanation of how we arrived at the right price and terms. Your company will be confidentially marketed domestically and internationally including being advertised on the internet and in multiple listing services of the BBF, which allows hundreds of Florida Business Brokers to help sell your company. We will keep you abreast of all activities relative to the sale of your business. Goldcrest Commercial will walk you through the entire sales process one-step-at-a-time; and that includes working with your professional advisors such as your CPA, attorney, etc. Our service will be complete when the right buyer purchases your business, the transaction closes, and you are completely satisfied.

Why is Seller Financing So Important?
In many cases, businesses listed for all cash simply do not sell. A seller demanding all cash can expect offers with discounts of 10 to 30%. With reasonable terms, the chances of a sale increase dramatically. Since very few lenders will finance the sale of a small company, seller financing may be the only way to sell your business. You will also receive interest from the note which can greatly increase the total amount received. Most of all, seller financing tells the buyer emphatically that the seller believes the company can make the payments.

What Happens When There is A Buyer For My Business?
First and foremost continue to run the business in an aggressive, growth-oriented way. Do not let up on business operations during the marketing period. You should make most decisions in the best interest of the long-term objectives of the company.
Maintain up to date financial information. Work with your accountant to provide monthly statements with year to date numbers. Real buyers want real data, usually no more that 60 days old.
Understand the tax implications before setting the selling price. This may very well require the assistance of a specialist in this field. Your company accountant is an expert at keeping the records of the company but may not be completely up to date on some of the latest structures that can be employed to reduce your total tax burden. An effective tax plan can allow you to price the business much more attractively without sacrificing your total return. This is a critical step in developing a win-win transaction.
If you are using an attorney, make sure they are familiar with the business closing procedure and documents in use in this area. Attorneys familiar with the procedures and documents in use by members of The Business Brokers Of Florida can quickly respond to your needs and answer your questions based on actual recent transactions. Attorneys familiar with the business closing process can sometimes save you thousands in legal fees. Make sure your attorney has time available to close quickly, usually within a few weeks.
You, too, should be prepared to close quickly. Once an agreement is reached between buyer and seller, buyers generally want to close as soon as possible. It is important to keep all matters pertaining to the sale confidential until the closing so that the business operations are not altered by employees, competitors or clients.

What Can I Do To Help Sell My Business?We will assist in the preparation of an offer. Our Standard Asset Purchase Contract will spell out the buyer's offer in detail. The offer may contain several contingencies and will specify due diligence the buyer will perform. You can expect to be asked for Tax Returns, Bank Statements, Sales Tax Reports and any other documents necessary to prove the financial performance of the business, usually for at least the past three years. Additionally, the buyer will want to review the lease, franchise agreement or other contracts that will effect the business after the sale.
All offers will be presented to you for your consideration. You always have the right to accept an offer, issue a counter proposal or reject the offer. It is important to know that if you don't accept the offer, a buyer can withdraw at any time. Be prepared to do some work at this point in the process. People from all over the world are seeking business opportunities in our area. Different nationalities and cultures approach negotiations in far different ways. You should take the time to consider all offers carefully and seriously. There may be some definite positives in the offer and the negatives may be offset with careful negotiations. Often, the first buyer turns out to be the best. We need to be best prepared.

Sheree Lynn Kilian