Frequently Asked Questions
Here are some of the most common frequently asked questions when it comes to buying or selling a business.
How long will it take to sell my business?
The time required for a sale depends on many factors including the price of your business, the type of business, marketing conditions and your willingness to finance all or part of the purchase price. On average, it takes 6 to 9 months to sell a business. One could however sell much sooner or take longer as many factors come into play when selling a business. Obviously, with reasonable pricing and terms one could expedite the sale. Your BC Business Broker can discuss with you how your business fits into these and other crucial general guidelines.
How will my business be advertised?
Discreetly. Confidentially. Without identifying the name or any revealing features, we market your business to our large database of qualified buyers both within our local offices, nationally as well as internationally. Directly connected with over 350 offices worldwide, we can ensure global exposure in over 20 countries. Many buyers will relocate for the right business opportunity and we have assisted several buyers in purchasing a business as part of their immigration process. We therefore also use a multitude of other associated listing web sites to reach our global markets. We may also run advertisements in the classified section of newspapers or other business publications and internet sites, specific target publications etc as we see fit to reach the target buyers. Our various networking and social affiliations also bring about great success in exposing your business to the right buyer. We recognize the crucial importance of confidentiality when a business is for sale, and unlike traditional real estate marketing (MLS, lawn signs) no one, other than the qualified buyer, will know it’s for sale. We achieve this by being very selective with the information in our marketing materials and to whom we provide this information. Interested parties may only receive information after they sign a Non-Disclosure Agreement and complete a Criteria Sheet. Our marketing methods are proactive.
How will I be protected regarding financing I provide to the buyer?
There are various instruments available to protect your interest. The closing or transaction lawyer will provide documentation evidencing the indebtedness. This may include a promissory note, share in escrow agreement, GSA, first or second mortgage on real estate or other security documentation or instrument to best secure your note. One should realize however that there is still an element of risk and there are no absolute guarantees. As a business owner, you likely already know this.
Will the buyer pledge any additional security for my loan?
In most cases, buyers do not like to pledge additional security. When a buyer purchases a business, they do so based on the business being able to generate sufficient cash flow to repay your loan and provide an income to meet their needs. These are some of the basic expectations that a buyer would have of a business purchase. When you ask for additional security you are sending a negative message. The buyer may be concerned they paid too much for the business or that it will not generate sufficient cash flow to repay your loan or provide for their income.
What types of offers should I expect to receive?
An astute buyer will structure the initial offer in order to get the best possible price and terms. Therefore, don’t be offended when you receive a low initial offer, as it’s the first step in negotiating an appropriate selling price for your business. All offers will contain important subject clauses, such as a review of the financial statements and company records, obtaining a satisfactory lease or determining the length of a training and transition period. Other contingencies specific to your business may also be included. These are normal and provide the buyer with the opportunity to verify the information presented in the marketing material.
How long is the training period for the buyer?
Generally, you will be expected to provide reasonable and adequate training and a similar time period of telephone consultation following the transition may be necessary depending on the type and complexity of the business and/or industry. Remember, by financing any portion of the purchase price you still have an investment in the business, so properly training the buyer is in your best interest.
Will I have to sign a non-compete agreement?
In most cases you will in order to protect the new owner. Generally, you will be restricted from competing within the market area of the business for a reasonable period of time For example, if customers come from within a 30 km radius of the business and you are providing the buyer with a five year loan, you will likely be restricted from competing within their market area for five years.
When should I tell my employees about the sale?
Our considerable experience has proven that it is best to tell your employees about the sale immediately before or following the closing. Of course, if there is an employee whose expertise will be needed after the sale you may have to advise them earlier in the process. Your Sunbelt business broker can assist you in determining the timing for notifying employees.
Does BC Business Brokers financially qualify the buyer?
No. We usually ask for a personal financial statement from the buyer, but do not verify the authenticity of the information. If you desire, we can run a credit report on the buyer, as long as they consent and you request it, however it is your responsibility to do whatever you feel is appropriate regarding qualifying the buyer. If you are carrying a substantial part of the purchase price, you should verify income, asset and liability information as carefully as would a commercial lender. Requesting an insurance policy for the amount of the financing is always a good idea.
What can I do to help sell my business?
As we begin the process of selling your business, there are certain things you can do to help us.
- Keep normal working hours.
- Make sure your financial records are an accurate reflection of revenues and business only expenses.
- Conduct business as usual. Do not let inventory levels dip below normal.
- Keep the business facilities clean and in good repair.
- Remove equipment or furniture that is not part of the sale.
- Provide us with required information in a timely manner.
- Be as accommodating as possible in setting appointments to meet with buyers.
Do I need to consider succession planning as part of my selling strategy?
Most definitely. According to a recent study prepared by the Canadian Federation of Independent Business, less than one third of small to mid size business owners are planning for their future succession. However, among those who have a succession plan, the majority are informal, unwritten plans, which have not been shared with the intended successor. Your BC Business Brokers advisor can assist you in preparing your plan and goal in selling your business taking in all aspects of the sale, direct you to the right professionals if required and generally assist in ensuring and implementing a successful exit strategy.
These frequently asked questions can guide sellers to a successful resolution for selling their business.