Defining Goodwill

You may hear the word “goodwill” thrown around a lot, but what does it really mean? When it comes to selling a business, the term refers to all the effort that the seller put into a business over the year. Goodwill can be thought of as the difference between the various tangible assets that a business has and the overall purchase price.

The M&A Dictionary defines goodwill in the following way, “An intangible fixed asset that is carried as an asset on the balance sheet, such as a recognizable company or product name or strong reputation. When one company pays more than the net book value for another, the former is typically paying for goodwill. Goodwill is often viewed as an approximation of the value of a company’s brand names, reputation, or long-term relationships that cannot otherwise be represented financially.”

Goodwill vs. Going-Concern

Now, it is important not to confuse goodwill value with “going-concern value,” as the two are definitely not the same. Going-concern value is typically defined by experts, as the fact that the business will continue to operate in a manner that is consistent with its intended purpose as opposed to failing or being liquidated. For most business owners, goodwill is seen as good service, products and reputation, all of which, of course, matters greatly.

Below is a list of some of the items that can be listed under the term “goodwill.” As you will notice, the list is surprisingly diverse.

42 Examples of Goodwill Items

  • Phantom Assets
  • Local Economy
  • Industry Ratios
  • Custom-Built Factory
  • Management
  • Loyal Customer Base
  • Supplier List
  • Reputation
  • Delivery Systems
  • Location
  • Experienced Design Staff
  • Growing Industry
  • Recession Resistant Industry
  • Low Employee Turnover
  • Skilled Employees
  • Trade Secrets
  • Licenses
  • Mailing List
  • Royalty Agreements
  • Tooling
  • Technologically Advanced Equipment
  • Advertising Campaigns
  • Advertising Materials
  • Backlog
  • Computer Databases
  • Computer Designs
  • Contracts
  • Copyrights
  • Credit Files
  • Distributorships
  • Engineering Drawings
  • Favorable Financing
  • Franchises
  • Government Programs
  • Know-How
  • Training Procedures
  • Proprietary Designs
  • Systems and Procedures
  • Trademarks
  • Employee Manual
  • Location
  • Name Recognition

As you can tell, goodwill, as it pertains to a business, is not an easily defined term. It is also very important to keep in mind that what goodwill is and how it is represented on a company’s financial statements are two different things.

Here is an example: a company sells for $2 million dollars but has only $1 million in tangible assets. The balance of $1 million dollars was considered goodwill and goodwill can be amortized by the acquirer over a 15-year period. All of this was especially impactful on public companies as an acquisition could negatively impact earnings which, in turn, negatively impacted stock price, so public companies were often reluctant to acquire firms in which goodwill was a large part of the purchase price. On the flip side of the coin, purchasers of non-public firms received a tax break due to amortization.

The Federal Accounting Standards Board (FASB) created new rules and standards pertaining to goodwill and those rules and standards were implemented on July 1, 2001. Upon the implementation of these rules and standards, goodwill may not have to be written off, unless the goodwill is carried at a value that is in excess of its real value. Now, the standards require companies to have intangible assets, which include goodwill, valued by an outside expert on an annual basis. These new rules work to define the difference between goodwill and other intangible assets as well as how they are to be treated in terms of accounting and tax reporting.

Before you buy a business or put a business up for sale, it is a good idea to talk to the professionals. The bottom line is that goodwill can still represent all the hard work a seller put into a business; however, that hard work must be accounted for differently than in years past and with more detail.

Copyright: Business Brokerage Press, Inc.

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A Deeper Look at Seller Financing

Buying a business requires a good deal of capital or lender resources. The bottom line is that a large percentage of buyers don’t have the necessary capital or lender resources to pay cash and that is where seller financing comes into play. The fact is that seller financing is quite common. In this article, we will take a deeper look at some of the key points to remember.

Is Seller Financing a Good Idea?

Many buyers feel that a seller’s reluctance to provide seller financing is a “red flag.” The notion is that if a business is truly as good as the seller claims it to be, then providing financing shouldn’t be a “scary” proposition. The truth is that this notion does carry some weight in reality. The primary reason that many sellers are reluctant to provide seller financing is that they are concerned that the buyer will be unsuccessful. This, of course, means that if the buyer fails to make payments, that the seller could be forced to take the business back or even forfeit the balance of the note.

However, it is important for sellers to look at the facts. Sellers who sell for all cash receive approximately 70% of the asking price; however, sellers receive approximately 86% of the asking price when they offer terms!

Seller Financing has a Range of Benefits

Here are a few of the most important benefits associated with seller financing: the seller receives a considerably higher price, sellers can get a much higher interest rate from a buyer than they can receive from a financial institution, the interest on a seller-financed deal will add significantly to the actual selling price, there are tax benefits to seller financing versus an all-cash sale and, finally, financing the sale serves as a vote of confidence in the buyer.

Clearly there are no guarantees that the buyer will be successful in operating the business. Yet, it is key that sellers remember that in most situations the buyers are putting a large percentage of their personal wealth into the purchase of the business. In other words, in most situations, the buyer is heavily invested even if financing is involved.

Business brokers excel in helping buyers and sellers discover creative ways to finance the sale of a business. Your broker can recommend a range of payment options and plans that can, in the end, often make the difference between a successful sale and failure.

Copyright: Business Brokerage Press, Inc.

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Selling a Business? Be Aware of These Four Potential Issues

We’ve outlined below a few unexpected aspects of the business sale process that can pop up. Sometimes they severely impact the turnaround time of a sale. But if you can understand these potential issues better, you will be better prepared to try to circumvent them.

1. Do You Have Time on Your Side?

It’s helpful to use an intermediary who will assist with the filtering of prospects vs. “suspects.” However, the inclusion of yet another party, in addition to both the business seller and potential buyers, increases the amount of time required to navigate the process.

Sellers are typically unaware of the time and documentation needed to compile the required Offering Memorandum. Once completed, the seller must provide both the intermediary and potential buyer more time to review and propose meetings and pricing. In the interim, owners are faced with the challenge of keeping their business thriving.

2. Trying to Do Too Much

It’s not surprising when a company owner is also its founder that individual is typically used to making all of the decisions. That’s why business owners in the midst of selling will soon find themselves challenged with the desire to fully be a part of both the selling process and the running of the business.

Delegation to someone else, such as the Sales Manager, can be truly invaluable. Think of your top people as extremely valuable resources. They may have first-hand knowledge regarding additional concerns such as competition and potentially interested acquirers. Bringing in trusted employees to be part of the sales process can be tremendously beneficial.

3. Delays Due to Stockholders

When mid-sized, privately held companies are supported by minority stockholders, these individuals must be included in the selling process—however small their share may be. The business owner will need to firstly obtain their approval to sell by using the sale price and terms as influencers. Of course, issues such as competing interests, pricing disagreements, and even inter-family concerns may cause conflict and further delay the process.

4. Money Issues

Once sellers decide upon a price that they would like to see, it is sometimes difficult for them to accept or even consider anything less. After all, a business owner likely created the company and may have a strong emotional attachment.

Another factor that often interferes with a successful sale occurs when sellers instantly turn down offers because they don’t meet with their desired asking price.

That’s when the intermediary can often come in to salvage the deal. A business broker often serves as a negotiator. He or she can work out a deal that is structured in a manner that works for both sides.

Copyright: Business Brokerage Press, Inc.

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Your Company’s Undocumented Worth

The valuation is a major factor that influences the overall selling price of the property. Business appraisals are based upon a multitude of criteria and indisputable records such as comparables, projections, discount rates, EBITDA multiples, and more.

While the appraiser may have all the information he or she needs, the business elements might be overlooked. That’s why it’s extremely helpful for business appraisers to first grasp the purpose of an appraisal prior to getting started. Unfortunately, the appraiser is often unaware of additional considerations that may enhance or even devalue a business’ overall worth.

Is There Unwritten Value?

Business owners generally agree that prospective buyers are mostly looking for quality in depth of management, market share, and profitability. Though undoubtedly more subjective than documentation, figures, and calculations alone, information regarding key business elements such as market, operations, post-acquisition, value drivers, and fundamentals is highly valued to potential buyers.

Here are some questions to consider regarding a couple of these crucial elements:

Is there an abundance of market competition?

Does pricing reasonably align with the demographic?

Are the company goals consistent with advancing technology?

Are there various and/or global means of reach and distribution?

Does the business have more potential beyond a niche?

What’s the company’s competitive advantage?

What are the strengths and weaknesses of its competitors?

Is there a great deal of alternative technologies?

Are there various vendors?

Is the company’s location convenient to its target audience?

Increased Success & Valuation

Successful businesses thrive due to company-wide values and consistent customer-centric efforts. In his book The 100 Absolutely Unbreakable Laws of Business, Brian Tracy summarizes this as “a company-wide focus on marketing, sales and revenue generation. The most important energies of the most talented people in the company must be centered on the customer. The failures to focus single-mindedly on sales are the number one causes of business failures, which are triggered by a drop-off in sales.”

Tracy continues by pointing out that trends may be the most pivotal consideration and bottom-line contributor to any given company’s success and, therefore, valuation. For 2017, projected trends include the increased use of video marketing, crowdfunding as a source of product validation, nutrition and fitness tracking products, the use of e-commerce, and the acquisition and training of remote employees.

Understanding Trends

Start-up companies are likely practicing as many current trends as possible within their limited funding in an attempt to establish market share, while mature companies are hiring millennials to keep their business hip to those same trends in an effort to protect their existing share. Business owners would benefit from studying and ultimately executing these current trends, as well as from acknowledging the successes and mistakes of their competitors.

Tracy suggests that daily conversations that encompass problem-solving, decision-making, and team collaboration are pivotal factors in making a company successful. And those performing all of these necessities? As Tracy reiterates, top companies have the best people.

Copyright: Business Brokerage Press, Inc.

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Service Businesses Perform Highest When It Comes to Sales

Recently, Business Brokerage Press performed a survey of brokers across the country to see what sells at the highest rate, and what they discovered was very interesting. Retail business sold at 17%, food and drink related businesses at 14%, service oriented businesses sold at 25%, auto related businesses sold at 9%, manufacturing businesses sold at 16% and distribution businesses sold at 11%. Businesses labeled as “other” sold at 5% and professional practices at 4%.

What is a Service Business?

Looking at this gathered information, it is clear that “service type businesses” are very hot and doing quite well. The range for what is considered a service type business is, in fact, rather broad. It encompasses everything from a dry cleaner and hair stylist business to a massage therapy chain or dental practice. Just so long as a business is providing a service and doesn’t fall into another category, it falls under the “service oriented” banner.

Food and Drink Businesses

One of the next key nuggets of information from the survey is that food and drink businesses tend to perform quite well too. Food and drink businesses range from bars to sit down restaurants or fast food establishments. The simple fact is that people need to eat, and this truth is certainly reflected in the strong performance of food and drink businesses. The need for certain types of businesses may change with changing times and changing technologies, but food and drink remains a staple.

Eating, for example, isn’t a trend and the tradition of visiting a local bar or restaurant is very established. In fact, some of the oldest continuously operating businesses in the world are bars and restaurants. Those looking for a business that has some degree of built in stability and is likely to be at least partially immune to emerging trends will be well advised to consider food and drink businesses.

The Mindset of Today’s Buyers

When you are considering what types of businesses that buyers may find interesting it is important to pause and reflect on the likely profile of prospective buyers. Today, a large percentage of prospective buyers are well educated and bring a lot of experience to the table. In short, they are savvy and know what they want.

This combination of education and experience also means that they are open minded and potentially flexible regarding the type of businesses that they will consider. Most prospective buyers will, in fact, be open to a wide array of potential options. At the end of the day, the most important factor for most prospective buyers will be whether or not a business is profitable.

The majority of prospective buyers will not be making an emotional buy. Instead, due to their combination of experience and education, they are very likely to focus on profitability above all else. Of course, this fact underscores the importance of having your business ready to sell long before the first prospective buyer sees it.

Copyright: Business Brokerage Press, Inc.

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What is Really in the Mind of Your Buyer?

It is always important to try and put yourself “in the other person’s shoes.” This fact is of paramount importance when dealing with prospective buyers. Thinking like a prospective buyer could, in fact, be the difference between selling your business and not selling your business. Yet, it is important to continue to put yourself in your buyer’s shoes during the entire sales process.

It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but then again there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business, the greater the complexity. This translates to the greater the risk of problems arising.

The “Little Things” that Could End Up Quite Big

Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and be organized. Lease issues is another common category for contingencies. Falling under the lease issue umbrella are topics such as whether or not the seller has agreed to stay on, or issues regarding the property or needs associated with the property if it is a rental.

Other common contingencies can include issues arising from equipment and fixtures that are being included with the sale. These are areas that could be easy to overlook, but they can serve to throw a major wrench into the workings of a deal. The so-called “little things” can cause a deal to fall apart.

3 Key Steps for Preventing Disruptions from Contingencies

Step One – Create a Comprehensive List

One easy move you can make to prevent disruptions from contingencies is to make a list of all FF&E or furniture as well as fixtures, equipment or any other items that could be included with the sale. If an item is not included be sure to remove it entirely.

Likewise, if an item is inoperable then repair it ahead of time. Or at the bare minimum, you could make a list of items that are currently inoperable and include those items in your list. Remember, you don’t want a last-minute surprise or misunderstanding to jeopardize your sale.

Step Two – Check Your Leases

Problems with leases can send deals spiraling out of control. It is a prudent investment of your time to look at things like your leases. You’ll want to make certain that there are no issues that could be viewed as problematic. If there are issues, then it is in the best interest of the deal that you disclose this information at the start of any deal. After all, you don’t want to waste anyone’s time, including your own.

Step Three – Predict Questions and Have Answers Ready

The time you invest in predicting potential questions and having the answers to those questions ready is time very well spent. You’ll look prepared and that helps build trust.

Be ready to answer questions that are likely to arise such as are you going to stay on with the business for a given period of time and what will be the cost, if any, of you doing so? What about employees staying on? Are there legal issues that should be considered? Being able to answer these kinds of questions is a prudent step.

Considering the needs of your prospective buyer will help you make a sale. In selling a business, there is no replacement for being organized and prepared.

Copyright: Business Brokerage Press, Inc.

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Does Your Asking Price Truly Matter?

It is no great secret that sellers often aim high. The logic sellers use is simple, “I can always reduce my price.” While that is true, sellers do need to remember that if the asking price is initially too high, buyers won’t even take a serious look. In short, your selling price must be bound by reality and what the market will bear.

Pricing Does Matter

When an asking price is too high buyers will simply move on. But in the meantime, you may have lost a qualified buyer that would have been very interested at a lower price. Pricing isn’t a factor that should be played with, instead it should always be treated in as professional of a manner as possible.

Instant Millionaire? Maybe and Maybe Not

Some sellers want to become instant millionaires and sell their business for top dollar. Sometimes this is warranted and sometimes the numbers don’t support lofty valuations. Every situation and every business is different. It pays to be realistic.

Studies have shown that there is usually about a 15% difference between what sellers want and what the market will bear. For example, when a business is over $1 million, sellers usually sell for 90% of their asking price. Smaller businesses, valued under a million, usually sell for about 85% of their initial asking price. (Now, that stated, it is important to keep in mind that only data on sold businesses factors into this statistic.)

Business Brokers Help Determine an Accurate Valuation

A business broker has considerably expertise when it comes time to calculate a reasonable asking price for a business. They know that it is essential that they come up with a price that is fair. As a result, business brokers take many diverse issues into consideration. A few of the factors that business brokers consider are location, competition and annual sales variations.

Prospective Buyers Can’t Read Your Mind

An experienced business broker can help you determine the right value for your business and determining the right value is key. The last thing you want is to have an evaluation that is far too high as you will immediately eliminate many prospective buyers. While you may know that you are willing to negotiate and perhaps even reduce your asking price substantially, prospective buyers do not know this fact. A realistic and appropriate asking price is of paramount importance and a business broker can help guide you towards the best decision.

Market Forces Have the Ultimate Say

In the end, it is the market, not the seller, that determines the correct selling price. If no one is willing to pay a certain price than a given business is overpriced. That may be a brutal fact, but it is also quite true.

Copyright: Business Brokerage Press, Inc.

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Strong Selling Points: Let Your Strengths Work for You

“Independent business owner” is a phrase with two meanings. Of course, it means being the owner of an independent business. But another way to look at “independent business owner” is to let this phrase define the very personality of the person at the helm. Independent. Confident. Self-assured. Strong-willed. These are vital entrepreneurial attributes, but, ironically, they can sometimes work against the business owner when it comes time to sell.

Since business owners are the type who know about selling — either products or services– and about making deals — haven’t they had to cope with suppliers, customers, and competitors throughout their business careers? — it’s not surprising that owners approach selling their businesses with these tried-and-true tactics and ideas. Sellers who have spent years building a business are often unaware of how completely different the process of selling a business is.

Savvy sellers, realizing the importance of a selling approach equal to this very important task, will depend on the guidance of a business intermediary. With professional guidance, sellers can benefit from their personal strengths instead of letting them get in the way of the selling process. The following “strong” selling points are signposts on the road leading to a successful transaction.

Price Your Business To Sell

Sellers are good “business people;” they naturally are after the best possible price for their business. Realistic pricing is perhaps the most important factor in selling from a point of strength. Understanding the marketplace, up-to-the-minute and not some high mark just past or in the possible future, is key.

The pricing of a business, different from the simpler means of valuing based on goods or services, depends on industry-tested valuation techniques, with intangibles incorporated to ensure that the business will not be underpriced. The price of a business is arrived at by a variety of factors, one of the chief of which is the intensity of a buyers interest in a particular business.

Know Your Buyer

The seller, although good at “psyching out” customers and vendors, may not be as adept at sizing up potential buyers. Some buyers are professional window-shoppers; talking a good game but never really ready to play. There are also the buyers who would play ball — if they only knew where the action was! First locating and then qualifying buyers is a key function of business brokers. They will use computerized data bases, professional associations and other networks nationally and internationally — all to increase the chances of selling a business at top value.

In addition, the business broker will determine the right buyer for the right business, focusing on those prospects who are financially qualified as well as genuinely (or potentially) interested in the business for sale. As part of qualifying buyers, to take the “fear” out of the likely need for seller financing, the business broker will assess the ability of a particular buyer to run a business successfully. This invaluable work by the broker not only locates the best buyers, it also frees the seller to concentrate on his role in the selling process.

Prepare Your Business for Sale

In addition to the obvious need for the business to appear clean and cared-for, there are important steps the seller must take in advance of putting the business on the market. In most cases, a business will sell based on the numbers. Your business broker will help you create a clear financial picture — in timely fashion — and to prepare statements suitable for presentation to a prospective buyer. Remember that buyers may be willing to buy potential, but they don’t want to pay for it. In fact, sellers should be open to about all aspects of the business that might affect the sale; otherwise, once the real facts are revealed, the deal may self-destruct.

Business owners are accustomed to coping with paperwork, but few have had exposure to the specialized contracts and forms required both before and during the selling process. The business broker, an expert at transaction details, will help guard against delays, problems, and premature (or inappropriate) disclosure of information.

Maintain Normal Operations

Another vital activity for the seller is to keep on top of the day-to-day running of the business. When a business intermediary is on hand to focus on the marketing of the business, the seller can focus on keeping daily operations on-target. Sellers are “people people,” and may have visions of wooing buyers with their great presentation of the business. Even if this were to happen, these sellers fail to visualize the number of buyers they would have to “woo-and-win” if handling the sale on their own.

Confidentiality

An adjunct to maintaining the status quo is the important task of maintaining confidentiality. Until a purchase-and-sale agreement has been signed, most sellers do not want to disturb (or jeopardize) the normal interaction with customers and employees; nor do they want to alert the competition. A business broker helps by using nonspecific descriptions of the business, requiring signed confidentiality agreements, and performing a careful screening of all prospects.

To keep the sale of your business on firm ground, be sure that your “strengths” as an independent business owner aren’t actually weakening the sale. Using these key selling points along with the expertise of a business intermediary will keep the process going strong.

Copyright: Business Brokerage Press, Inc.

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What Are Your Company’s Weaknesses?

Every company has weaknesses; the trick is to fix them. There is a saying that the test of a good company president or CEO is what happens to the company when he or she leaves. Some companies–on paper–may look the same, but one company may be much more valuable due to weaknesses in the other company. Not all problems or weaknesses can be resolved or fixed, but most can be mitigated. Fixing or lessening company weaknesses can not only significantly improve the value, but also increase the chances of finding the right buyer. Here are some common weaknesses that concern some buyers, causing them to look elsewhere for an acquisition.

“The One Man Band”

Many small companies were founded by the current president, and he has made all of the major decisions. Since he has not developed a succession plan, there is no one in place to take over if he gets hit by the proverbial truck. He is the typical one man band; and, as a result, the company is not an attractive target for acquisition.

Declining Industry

Companies that are in a declining market have to be smart enough to recognize the situation and make changes accordingly. A real-life example of a “smart” company is one that made ties, and, realizing the decline in this apparel item, switched over to making personalized polo shirts. A company can still make ties but has to have the foresight – and ability – to move into new product areas.

Customer Concentration

This is a major concern of most buyers. It is not unusual for the one man band to focus on what made the company successful – one or two major customers. He has built the relationships over the years. These relationships are seldom transferable. Finding new customers may take time and money, but the effort is absolutely necessary should the owner eventually decide to sell.

The One Product

Many one man band run companies were based, and still are, on either the manufacture and sale of one product or the creation and development of a single service. Henry Ford made a wonderful car – the Model A – but that’s all he made. General Motors decided that many people would like something different and were willing to pay for it. Fortunately, for Ford, he caught on quickly, but almost went out of business with the thinking that one model fits everyone.

Aging Workforce/Decaying Culture

Young people are not entering the trades, leaving many jobs such as tool and die positions filled with “old hands” who will soon be retiring. Technology may be able to replace them, but that decision has to made and implemented. No one wants a business that will have idle machines with no one trained to operate them.

There are many other areas that could be considered company weaknesses. If there is a Board of Directors or an Advisory Board, perhaps they can help the one man band create a succession plan and just as importantly – a successor. Certainly the time to act on all of this is before the decision to sell is made. Whether current ownership plans on staying the course or eventually selling the company, the good news is that resolving company weaknesses is a win-win situation.

If you are considering selling your company in the next year or so, the time to start is now. Planning ahead can significantly add to the eventual selling price. A visit with a professional business intermediary is the first step.

Copyright: Business Brokerage Press, Inc.

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Be a Winning Seller: Good Negotiation is the Key

You’ve made the big decision to put your business on the market. Your reasons for selling are valid, carefully-considered, and “good” – the kind that won’t make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You’ll come up with a price – maybe a little high, but why not? – and let gut instinct (an attribute common to successful business owners) lead the way.

Wait just a minute. Or maybe a quarter of an hour; however long it takes you to bone up on your negotiation skills with the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business.

Gather Your Forces

The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as tactics for marketing the business. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal income tax returns, a list of fixtures and equipment, copies of equipment leases (if any), the lease and any lease-related documents, a copy of your franchise agreement (if applicable), lists of loans (if applicable), with amounts and payment schedule, an approximate tally of inventory on hand, and the names of any outside advisors (attorney, accountant, etc.) you plan to consult.

Be Market-Smart

It’s vital to have a clear and realistic notion about the value of your business. Pricing your business intelligently is as important as impressive financial records. Your business broker will apply industry-tested valuation methods, including ratios based on the sales of similar businesses, as well as the historical data that most closely matches your type of business. He or she will also incorporate intangibles to insure that the business will not be underpriced. At the same time, your broker will make sure you understand how the price is dictated by the marketplace and that realistic pricing is an absolute must. Most buyers won’t wait for an outsized price to drop – they will just go somewhere else.

Know Your Buyer

Finding the right buyer may be more important than getting that extra-high asking price. Your business broker will determine the right buyer for the right business, focusing on those prospects who are financially qualified and are genuinely interested in your type of business. It’s important also to know something about the bargaining power of the buyer and to discover early on how he or she plans to finance the purchase of your business. Your business broker will do that and more: he or she will anticipate the buyer’s concerns and counsel you about being up-front about any problems that might make a buyer suspicious and therefore unnecessarily adversarial during the negotiation process. Steeped in knowledge about negotiating price, terms and other vital aspects of the sale, the broker will guide you each step of the way. During the early stages, while the buyer is still considering making an offer, the broker is the ideal person to follow up and keep the deal running smoothly. Working alone, you could lose bargaining effectiveness by doing the follow-up yourself. And, in general, having someone else negotiate on your behalf is the smartest way to go. The “middle man” can get your thoughts across, keeping you at a distance from the words themselves.

Be Flexible

In negotiating the sale of your business, you need to keep the ball rolling once an offer has been presented. Study it closely, and don’t automatically despair. Just because you didn’t get your asking price doesn’t mean that the offer has nothing to commend it. It may have other points to offset what you feel is a low figure, such as – if the deal is to be seller-financed – higher payments or interest, a consulting agreement, more cash than you anticipated, or the promise of a buyer relationship that will make life easier. In evaluating an offer, take the long view and look for the ways in which the offer just might accomplish your objectives. Above all, don’t think in terms of “punishing” the buyer because of a low offer. This is the worst reason for rejecting an offer – and certainly a self-defeating one for you.

Beef Up Bargaining Power

The best negotiating weapon is to have options available. For the seller, the mightiest one is lack of desperation. With any luck, you have not waited too long to sell and your business is sound. Carry this a step further: be sure, in preparing to sell, that you don’t let the business slip. It’s important that prospective buyers see your business at its best – bustling, and showing no signs of neglect. You should, for example, keep normal operating hours, repair signage and other first-impression areas of the business, repair or remove non-operating equipment, remove items not included in the sale, maintain inventory at constant levels. Make it obvious that you have not been forced to sell, and that – if necessary – you could refuse all offers and carry on the operation of your business. This may be the last thing you want to do, having made the hard decision to sell, but the buyer won’t know that.

Master the Art of Good Timing

Timing is crucial to the successful sale of a business. Any deal has a shelf-life, and it will go stale if it sits around too long. On the other hand, sometimes ideas need extra time to jell – and people sometimes need a little time-and-space to be more objective about their own positions. Your business broker will keep the process moving at the proper pace. He or she will also provide or offer advice about the specialized contracts and forms necessary for the completion of the sale.

In negotiating the sale process, you will benefit many times over from the guidance of a business broker professional. The business broker represents you, the seller, and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to you. The broker will also present and assess offers and, at the appropriate juncture, he or she can help in structuring the sale and negotiating its successful close – helping to create a win-win situation for everyone involved.

Copyright: Business Brokerage Press, Inc.

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