If you’ve gone this far, then selling your business has aroused enough curiosity that you are taking the first step. You don’t have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer some of your questions and help you through the maze of the process itself.
What is my business worth?
Quite frankly, if we were selling our business that is the first thing we would want to know. However, we’re going to put this very important issue off for a bit and cover some of the things you need to know before you get to that point. Before you ask that question, you have to be ready to sell for what the market is willing to pay. Every seller would love to get paid for their “sweat equity” but the buyer, realistically, won’t pay for that. The value of the business is really what a buyer will pay for the business. Most of the time it is based on a mathematical formula of the sellers discretionary earnings. However, there is some give and take, depending on the particulars in your business. When we meet with you, we will give you a free evaluation of what we think the business would actually sell for in the current market.
How long do you think it will take?
There really isn’t a rule of thumb on how long it will take. For almost every business there’s a buyer out there, it’s just a matter of time until that person happens to see the ad and responds. That’s why it’s so critical to be listed with a broker that does heavy marketing. The internet is a great tool for marketing but unless you are on the first page, you often don’t get seen. California Business Brokers works very hard on marketing your listing to as many buyers as possible, to give it the best of selling. Other factors that have an impact on how fast it sells are things like;”How many people could run this type of business?” The fewer the number, the longer the sale. Also, how well it’s priced is a huge factor. Businesses that are overpriced tend to sit on the market for a long time, some never sell. The real key to selling it will be to price it right, market it well, organize the paperwork as much as possible and work with California Business Brokers.
What are the first steps?
Before you even think about placing your business for sale, there are some things you should do first. The first thing you have to do is to gather information about the business.
Here’s a checklist of the items you should get together:
- Three years’ profit and loss statements
- Federal Income Tax returns for the business
- List of fixtures and equipment
- The lease and lease-related documents
- A list of the loans against the business (amounts and payment schedule)
- Copies of any equipment leases
- A copy of the franchise agreement, if applicable
- An approximate amount of the inventory on hand, if applicable
- The names of any outside advisors
Prospective buyers eventually will want to review your financial figures. A Balance Sheet is not normally necessary unless the sale price of your business would be well over the $1 million figure. Buyers want to see income and expenses.
They want to know if they can make a living running the business exactly as you have been running it. If not then it’s what’s considered an “Asset Sale”. In this case we are selling the assets of the business with no promises of past profitability. Businesses can be sold this way but they must be priced low to get someone to take the chance.
Selling a business can be tricky if you’re not in the right hands. Our motto is, “Deal with a professional-Get professional results”. All brokers are not all the same, we feel that it’s imperative to deal with an ethical, committed professional brokerage to get the results that you desire, at California business Brokers that’s exactly what you’ll find.
For a free evaluation please call us to see why CBB is the right choice for you.