What Can Business Brokers Do?

Evaluating a business is a complicated process. Every business is unique and has its own value. If you price a business too high, there will be no buyers and the business will sit on the market for too long which can have a negative impact on the business and if you price it too low, then as a business owner, you may loose thousands of dollars. This is where a business broker comes in. Experienced business brokers are familiar with the market trends and the price that various businesses are being sold at. They can also bring forward only “qualified” buyers which means you, as a business owner do not have to waste your time with buyers that do not have good credit history or money to purchase the business. Business brokers can also assist you in structuring the sale so it makes sense for everyone and will facilitate the selling process.

How Do We Price a Business for Sale?

Every business is different yet every industry has a set formula that could be used to come up with a price range. The length of time, the business has been established, the length of the current lease and its terms, whether it is absentee-owner or owner operated, its financial records, the value of its fixtures, furniture and equipment, the amount of inventory at cost, the level of competition in the area and its goodwill all play major role in evaluating a business and coming up with an accurate value.
For a complete and Free Business Evaluation, please contact Wise Business Advisors at (818)933-5222.

Information Required for Pricing a Business

• Last twelve (12) months of Business Bank Statements
• Last three(3) years of profit and Loss Statements
• Last three(3) years of Tax Returns(or Schedule C)
• Copy of the Lease and related documents such as amendments to the lease
• A current list of All Fixtures, Furniture and Equipment
• A Balance Sheet for the Business
• Name and contact information for the accountant, attorney and other outside professionals
• Copy of the Business License

How Important is Confidentiality?

When you list your business with a residential agent, the first thing they will do is to place the business profile on Multiple Listing Service (MLS) which is a public service and this will increase the risk of your clients and employees finding out that your business is on the market. This is by far the most negative and dangerous situation for your business. As a Business broker, any information that you furnish to us is confidential and will not be disclosed to anyone except those buyers that have been qualified by us to purchase a business similar to yours and have completed a Confidentiality Agreement and Buyer’s profile.

What Are the Steps Involved in Selling a Business?

Once a business broker has evaluated the business and the seller has accepted the asking price, then the broker will create a detailed and a general business profile along with several photos for the business. The general business profile is advertised on 15-20 business websites that are targeted towards business buyers. The general business profile is also e-mailed to all of our existing “qualified” buyers that have contacted us in the past. Once a qualified buyer has completed a Confidentiality agreement and a buyer’s profile, then a detailed business profile is sent to them and an initial meeting is set up between the buyer and the seller. During this meeting, no financial records are disclosed. Once the buyer is sufficiently interested, then a contingent offer is presented to the seller in writing with several contingencies. At first, the seller might not like the initial offer, but remember this is only the first offer and there is always room for negotiations and as long as the seller and buyer are both flexible, there is always a chance to create a win-win situation for both parties. Once the contingent offer is accepted by both parties, then a due-diligence period of 10-14 days shall start. During this period the buyer will conduct his observations and needs to verify the financial records and might bring in outside advisors to help them review financials. This is where most deals fall apart due to the seller either over estimating their financial situation or not being able to prove them. HINT: It is always better to under promise and over deliver rather than the other way around.

Once the due-diligence period is over, then the buyer will remove the financial contingency and this is a good time to talk to the landlord and start the lease negotiation process. At the same time, Escrow can be opened. Once Escrow is opened, it shall take 21-30 days for it to close. If there are special licenses such as Liquor from ABC, this process will take longer. Once the Escrow is closed, the seller must go to State Board of Equalization to close their Seller’s Permit and pay the necessary fees and take the proof to Escrow to have the money be released to them and then the seller must start training the buyer for the period that it has been agreed upon by both parties.

What Are the Financing Options?