Business Owner FAQs
The questions can be endless, but here are some of the top questions we field when speaking with Business Owners interested in selling their business. David Letterman has his “Top 10 List” and here is Intemedior Business Advisors’ “Top 20 Questions”:
Click on each of the questions below to see the answer…
How long you will have to stay with the business after a sale is as unique and varied as the number of business sales that occur. In some cases, a Business Owner could be required to stay for several years after a sale, but in most cases the typical transition period to new ownership control is anywhere from three months to one year. The best way you, as a Business Owner, can manage this transitionary period – is to establish your role in day-to-day operations such that you become unnecessary.
The more dependent your business is on you as a Business Owner, the longer the transitory term may be prior to exiting the business once a sale is complete. Intemedior Business Advisors team can assist you with this assessment and subsequent strategies to correct any areas of concern with this situation.
As with the question about how long you will have to stay with your business after the sale, tax implications of a sale are highly dependent on numerous factors with the business and how the business conveys to a new owner. The answer to this question is best left in the hands of financial professionals as Intemedior Business Advisors does not replace a CPA and does not give tax advice. That said, we have numerous relationships with certified professionals that focus strictly on deal terms and structure that create for a most favorable taxable situation for our clientele. We like to begin with the end in mind – so we will encourage you to explore these options and opportunities early on in the process with marketing your business.
As a Business Owner, the way to get the best deal selling your business is first, and foremost, to keep your foot to the floorboard. Cram the accelerator so hard to the floor in fact, that your foot goes through the floor – possibly taking your business to new levels you never expected. Too often, Business Owners list their business for sale, put their hands behind their heads, lean back in the chair and wait for the deal to happen. Meantime, the business starts to slide and nothing can be worse in the eyes of a potential Buyer, than a declining stream of revenue – profit, or both. To get the best deal, keep your foot on the gas and strive to take your business to new heights. That’s what attracts the best Buyers and best deals…
Success Fees are as varied as the firms that will represent your business for sale. Be wary of the extremes… A firm that charges steep fees upfront to represent your business for sale, may be more concerned with listing your business as compared to actually selling it. In contrast, a firm that charges no fee at all to represent your sale, may be very eager to list your business, but may not offer a quality deliverable which may not put your best foot forward in the marketplace. At Intemedior Business Advisors, our upfront fee is modest, strictly designed to cover overhead costs of YOUR deliverables to get you to market. And, any upfront marketing fee charged to you by our firm, is credited back to you against the final success fee when your business is sold.
The majority of Business Owners have never sold a business… Therefore, it is important to understand the role an Advisor plays acting as an Intermediary or Broker, and what the Owner’s expectations of the Advisor should be. Business Brokerage is largely an unregulated industry so a Business Owner should take great care in entrusting what is likely their most valuable asset to anyone but a highly trained and experienced professional. There are numerous resources throughout this website that will assist you in making this decision.
We’ll start the answer to this question with a question and the appropriate answer…
Why would someone want to start a business?
To sell it!
Therefore, if you have not prepared an exit strategy for your business…the time is now! Starting a business with the idea that you will sell it – drives your actions in that direction on a daily basis. As we said earlier in this series of questions, you need to “begin with the end in mind”…
Intemedior Business Advisors deploys a comprehensive process of assessment to determine where you are in “readiness to sell”. Our business model is built on not just selling businesses, but helping Business Owners that wish to sell, but are not ready, to achieve their goals through a comprehensive process of coaching and consulting when necessary.
As stated in the previous answer, Intemedior Business Advisors has a comprehensive process of assessment that will help interested Business Owners determine their readiness to sell. Industry statistics tell us that only 10% of all businesses listed for sale actual sell. When evaluating this statistic alone, our team recognized there was a problem in our industry that needed to be solved. As such, long before the decision is made to list a business for sale – we carefully evaluate potential market response with Business Owner expectations and, if the two are not aligned – we don’t say “no”, but we we may say “not now – and here’s what we need to do to get there”.
This was the very next question that our Founder had when he heard the industry statistic that only 10% of all business listed – actually sell… He looked at this statistic and said to himself, “If only 10% sell, then what do we do for the remaining 90% of the Business Owners of which the majority wish to sell for whatever reason?”
Intemedior Business Advisors team offers that solution, providing coaching and consulting services to help our Business Owners achieve their goals. As the adage goes, “there’s a Buyer for everything”. That said, what will the Buyer pay and under what terms? If, in our assessment, a Buyer would not be willing to pay what a Business Owner wants at their terms, then we feel that it is our obligation to have the hard conversation as to why, and then work with you, the Business Owner to correct that situation.
Business Owners are rightfully concerned about issues with confidentiality when putting their company up for sale. While they don’t want anyone to know the company is for sale, they want the highest value in the shortest amount of time – which becomes the paradox. Every inquiry made on a business for sale is protected by the execution of a confidentiality agreement with our firm. And, while this agreement does not mean a violation of confidently won’t occur, it does put all parties on notice with the importance of confidentiality and the severity and potential ramification of a breach. Our Advisors carefully screen all interested candidates for a business acquisition prior to disclosing any confidential information.
The simple answer is “Yes, just as many Buyers as any other Business Advisory Firm or Brokerage”. Numerous Business Brokerage Firms tout massive databases of Buyers that include individuals, corporations and private equity firms. These databases aren’t Buyers – they’re leads. Brokerages that have large internal databases of leads, likely have a large percentage of contacts that are not actively looking for a business.
Ask firms that tell you they have a massive number of “Buyers” how many deals they closed in the past year. The bigger the database, the lower the closure rate they would likely demonstrate as a firm matching up Buyers and Sellers. We all have access to many of the same external resources and databases. True potential “Buyers” actively looking for businesses are actively registering and non-disclosing with every Advisory Firm/Brokerage they can find.
“Houston, we have a problem…” Remember that famous line from Apollo 13? At one point in the movie that documented the impossible task of bringing the spaceship back to earth – the mission was likened to slipping a vehicle from thousands of miles away through a window the thickness of a piece of paper. That’s our job at Intemedior Business Advisors and there is no better way to put it. Regardless of whom you decide to list your business with, we’re all looking for the needle in the haystack. What makes us different is how we do that – and the integrity and persistence with our approach.
The answer to this question is custom tailored to your unique requirements. Our founder is actively involved in oversight with all of our transactions but your key contact will depend on what you need to meet your objectives. You may start with our firm, ready to go, and immediately be place with one of our highly trained Advisors focused on selling businesses. If work needs to be done to get you ready for market, you may work with one of our highly experienced business coaches or consultants, that may also carry you through the selling process, or hand you off to a full time selling associate at the appropriate time – this all depends on your needs. The one thing you can count on, is that our firm is dedicated to matching you up with resources that are in your best interests – not ours.
Intemedior Business Advisors has a varied fee structure to meet the individual requirements and objectives of our clientele. Our pricing structure includes fees for assessments, marketing, coaching, consulting and selling success. Fees are dependent on what our Business Owners need from our service bundle to help them be successful and/or exit from business ownership. A phone consultation is necessary to determine your needs and the appropriate fees that will be charged.
Intemedior Business Advisors is headquartered in Austin, Texas. We market and sell companies nationally. If your particular situation cannot be addressed by our team – rest assured that we have a wide network of resources, capable of taking care of your needs. We offer full service anywhere and everywhere that we can and, when we cannot, we will refer you to another Trusted Advisor that you can count on.
Intemedior Business Advisors is a team of professionals who facilitate the successful sale of your business. We help Business Owners decide how they wish to be positioned and determine deal structures that make sense for the Seller and Buyer alike. Our mission is to find the right Buyer, coach both parties through negotiations and keep a deal on track to timely and successful closing. We work with interested Buyers on necessary details for the buying process to assure they will be able to successfully consummate the deal.
We are not magicians and cannot sell a business that is overpriced or requires an unreasonable set of terms on the part of a Business Owner. A Business Advisor cannot make the market – they can only manage it. Ultimately, the market determines what a business will sell for. Our job is to:
- Assess your business and readiness to sell,
- Provide guidance with the most probable response a Business Owner will receive from the Market,
- Aggressively and strategically market your Business focusing on your strengths and value and,
- Effectively manage the due diligence and contract-to-close process with ethics and integrity to assure that our Business Owners’ goals and objectives are met.
Selling a business, which is completely different than selling anything else, is very time-consuming. Predicting how long a business may take to sell, can only be accomplished through a comprehensive assessment with your unique situation. The type of business, location, condition of equipment, Business Owner’s expectations with price, terms and structure, narrowness of the Buyer base – all weigh heavily in this situation. Be wary of Brokers telling you how quickly they will get you sold without first spending time to understand your business and research market conditions for your specific situation.
There are three main stages to selling your business. There’s onboarding to market launch, fielding offers from market and, contract-to-close. Stage one will take from one to three months’ time dependent on the complexity of your business and how aggressively you, the Business Owner, work with our team to gather all the necessary details to create your deliverables. Stage two is the biggest variable in the process… Dependent on all the factors and conditions mentioned above, the market could respond with an offer immediately or, it could take several months to years to receive a response. Stage three will typically take 90 to 120 days dependent on how well your business is in order which can greatly affect the due diligence process.
It is important to price your business properly from the start. Business Owners often think they can start high and negotiate their way down. This is a mistake, as Buyers will simply refuse to look at an overpriced business which creates for significant lost opportunity that may never be recovered. If we reduce this answer to a formula, it would be:
1-3 months Onboard + Market Response + 3-4 months Closing = 4-7 months plus Market Response
Industry statistics tell us that Business Owners that demand all cash for their business, receive an average offer 15% lower than those who extend and accept terms. And, in many cases, businesses listed for all cash, simply don’t sell. Offering reasonable terms increase the chance of selling a business dramatically while greatly reducing time-period needed for market response to an offer.
A business that qualifies for SBA Lending will greatly benefit from an expanded market and base of interested Buyers – many times resulting in reduced marketing time to receive an offer. Present SBA loan limits are $5 million so businesses with values up to that limit can qualify. If a Buyer pursues SBA lending to secure your business, the SBA will require a certain amount of Seller financing in the transaction. Many Business Owners are unaware of just how much interest they can receive when offering Seller financing – which results in an even greater overall return on the sale of their business.
Once a Buyer has expressed interest in your business to our team of Advisors, we work closely with you and them to put together the necessary offer in form of an Indication or Letter of Interest (IOI or LOI). This non-binding document will have certain contingencies. The main contingencies typically expressed in an offer are 1.) a period of due diligence and, 2.) securing necessary financing for the deal.
Due diligence is where the Buyer performs a thorough review of company financial records, business documents, lease agreements, franchise agreements (if any) and any other pertinent information needed to validate the business offering. The contingency for Financing Approval is necessary because, while we want to know that the Buyer qualifies for a loan amount up front, it is equally important to their lender that the business they are buying will cover the necessary debt service over the life of the loan. At any time during this process both the Buyer and you, the Seller may withdraw from the process if the price, terms or structure of a deal, are not mutually agreeable to both parties.
We submit all offers received to our Business Owners. Many times, a first offer may not seem very appealing – but it is a starting point for negotiations. Rarely will we see an initial offer accepted right out of the gate. An offer is a vehicle for a Business Owner and Buyer to communicate their various interests with how a deal will get done. Our job is to find the common ground and create for a meeting of the minds financially between the two parties.
There is an adage in the industry that “time kills all deals”, so it is important that both you, the Business Owner and an interested Buyer work aggressively once an interest is expressed, to keep momentum with any negotiations and the subsequent process with due diligence and contract-to-close. As your Trusted Advisor, we work relentlessly to keep momentum and the process on track to create a successful situation for you.
Buyers are interested first, and foremost, in acquiring companies that are profitable and have a bright future. So as stated in many of the resources offered on this website, the most important thing a Business Owner can do when they have decided to seller their business – is put your foot on the gas and keep growing!
The second most important thing you can do as a Business Owner is work aggressively with our team putting together the necessary deliverables and then keep us up to date with the latest financial documentation and status reports on your business. If you have an accountant, work closely with them to make sure they have the most current financial information. When working with an attorney, make sure you have engaged one that specializes in business law in the Mergers & Acquisitions arena.
Finally, as a team, with our Advisors – we must all be working toward the common goal of selling your business for the best price and terms available in today’s market. And on receipt of an acceptable offer, work aggressively as part of the team to close the sale as quickly as possible. Remember that, as your Trusted Advisors, our team is on your side – only with your cooperation can we best achieve your goals and objectives with the sale of your business.
The Letter of Intent has been signed by both buyer and seller and everything seems to be moving along just fine. It would seem that the deal is almost done. However, the due diligence process must now be completed. Due diligence is the process in which the buyer really decides to go forward with the…Read More »
Surveys have shown that a seller who asks for all cash, receives on average only 70 percent of his or her asking price, while sellers who accept terms receive on average 86 percent of their asking price. That’s a difference of 16 percent! In many cases, businesses that are listed for all cash just don’t sell. With…Read More »
When a buyer is sufficiently interested in your business, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there…Read More »
A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. You might also ask if their schedule will allow them to…Read More »
Business brokers are the professionals who will facilitate the successful sale of your business. It is important that you understand just what a professional business broker can do — as well as what they can’t. They can help you decide how to price your business and how to structure the sale so it makes sense…Read More »
It generally takes, on average, between five to eight months to sell most businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter…Read More »