Seller FAQ

Frequently Asked Questions:

  1. Why should you consider seller financing?
  2. So I have a buyer for my business – what happens now?
  3. Is there something I can do to help sell my business?
  4. What are business brokers and what can they do?
  5. How long should I expect it to take to sell my business?

Why should you consider seller financing?

In today’s marketplace, a seller should expect to finance some portion of the sale. Financial institutions today are asking for sellers to take back some piece of the sale price, especially if the intangible portion of the sale is an unusually high percentage of the price. When reasonable terms are set up, the chances of selling increase and the time period to sell decreases. Many sellers don’t realise how much interest they can receive by financing some or all of the sale of their business. In some cases, the amount received greatly increases.

One important point that is easy to overlook is that allowing for seller financing tells the buyer that you have confidence that the business can, indeed, pay for itself. Of course, not all sellers are in a position to carry. Each situation must be analysed and reviewed. At Interactive, we can help you make the right call.

So I have a buyer for my business – what happens now?

When you have a potential buyer, the first thing to expect would be to get an offer in writing. When you look at this proposal, you may find contingencies, which deal with a detailed review of your financial records, financing and/or environmental issues. Your buyer may even ask for details of your lease arrangement, and franchise agreement when applicable. At this point, you can accept these terms or make a counter offer.

Of course, if you do not accept the buyer’s proposal, he or she can withdraw it at any time. Even if you are not pleased with the offer you have received, you should look at it carefully. Even if it’s lacking in some areas, it might have other advantages, so don’t disregard it too quickly.

The next step of the process takes place once you and the buyer are in agreement. At this point, you will need to satisfy and remove any contingencies. You and the buyer must cooperate during this process.  Otherwise, he or she may feel you’re hiding something. Don’t be surprised if the buyer brings in outside advisors to review the information.

As soon as all conditions have been met, final papers will be drawn and signed. After the closing, money will be distributed and the new owner will take possession of the business.

Is there something I can do to help sell my business?

It goes without saying that a buyer will want up-to-date financial information. Work with your professionals to make all current information available. Make sure that your attorney is familiar with all laws and the business closing process. If you have an attorney, you may also want to check to see if he or she could participate at a closing on short notice. You wouldn’t potentially want to have to wait for an attorney to make the time to prepare documents or attend the closing. When it comes to any business sale transaction, time is of the essence. When parties don’t close on schedule, the buyer could reconsider or make changes in the original proposal.

What are business brokers and what can they do?

Great question! Business brokers are professionals that will facilitate the successful sale of your business.  However, there are certain things business brokers can and cannot do. For example, they can help you price your business and structure the sale. They can also assist you to find the right buyer and negotiate effectively with that party. Business brokers can also help buyers to successfully purchase a business.

Keep in mind that business brokers are not magicians, and this means that they can’t sell overpriced businesses. If your business is structured and priced accurately, chances are that it can and will sell.  However, only the market will determine what a business will sell for in the end. There are a variety of factors that can influence a sale including the amount of the down payment you’ll accept as well as the terms of the seller financing.

How long should I expect it to take to sell my business?

In general, 80% of businesses close within 12-14 months of listing. Keep in mind that this figure is just an average. However, if you get together the information needed to begin the marketing process, the overall time period will decrease. Pricing your business properly from the start can also make a big difference.

While some sellers want to overprice their businesses with the idea that they can always come down in price, this strategy usually backfires. Many buyers won’t even look at overpriced businesses.  Another aspect that can be a key ingredient to a quick sale is the down payment. When a down payment is lower, the time to a successful sale is typically shorter. When there is a reasonable down payment it also tells a buyer that the seller has confidence in the business’s ability to make the payments.