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Today's independent business marketplace attracts a wide variety of buyers eager for a piece of ownership action. Buyers of small businesses are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit.
The following is some basic information for anyone considering purchasing a business. Is may also be of interest to anyone thinking of selling their business. The more information and knowledge both sides have about buying and selling a business, the easier the process will become.
Statistics reveal that out of about 15 would-be business buyers, only one will actually buy a business. It is important that potential sellers be knowledgeable on what buyers go through to actually become business owners. This is especially true for those who have started their own business or have forgotten what they went thorough prior to buying their business.
Why does it take so long to sell a business? Price and terms are the biggest reasons.
Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex.
Buyers buy a business for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. Here are just a few of the reasons that buyers buy businesses:
41% joined the family business;36% wanted more control over their future...
To find the real value of a business, we must go to its very heart: the attitude, work habits, managerial style, customer/marketplace savvy, and community reputation of the person in charge.
This question can only be answered by addressing other related questions, specifically: Who’s asking and for what purpose?
Before answering the question, it makes sense to first ask why people want to be in business for themselves. What are their motives? There have been many surveys addressing this question. The words may be different, but the idea behind them and the order in which they are listed are almost always the same.
A recent survey revealed the following about the length of time that selling a business requires:
Average time from putting the business on the market to time of sale:
It took from four to 12 months to sell approximately 82 percent of businesses, with 38 percent falling into the seven- to nine-month range. Certainly some businesses sell more quickly, but at the other end of the spectrum, over eight percent are on the market for over 12 months.
Why does it take so long to sell a business? Price and terms are the biggest reasons. Not over-pricing the business at the beginning of the sales process is a big plus, as well as a transaction structured to include a reasonable down payment with the seller carrying the balance. Having all of the necessary information right from the beginning can also greatly reduce the time period. Being prepared for the information a buyer may want to review or having the answers available for the questions a buyer may want answered is the key.
Here is the basic information that a prospective acquirer will want to review:
In addition, here are some of the questions that buyers may have. A prepared seller should have ready answers as well as the information to support them.
A prepared seller is a willing seller, and having the answers to the above questions can significantly reduce the time it takes to sell a business. Using the services of a professional business broker can also greatly reduce the time period. They are knowledgeable about the current market, how to market a business and they can advise a seller on price and terms. They can also recommend professional advisors, if a seller doesn’t have them already. Using advisors who are transaction-experienced can also shorten the time it takes to close the sale.