FAQ (Seller)
The time needed for sale depends on a great many factors including the price of your business, the type of business, and your willingness to finance the buyer. In general, it takes six months to a year or longer to find a buyer for a business and close the sale. The price and the terms you are offering are important factors. The more reasonably priced and the better the terms offered, the faster the sale. Your Sunbelt broker can discuss with you how your business fits into these general guidelines.
For specific businesses, we do target marketing to companies approved by the Seller. This is when we go after strategic buyers or Private Equity Groups (PEGS) who want to acquire companies within your industry.
Since the market is strong now and businesses are showing 3 years of growth, we are finding many multiple offers. When this occurs the offers are typically higher because the buyers are competing to get your company and will tend not to come in as low since they know there are other offers. All offers that you receive will have some contingencies.
Generally, these contingencies concern review of the financial information, obtaining a satisfactory lease and agreement on a training and transition period. Another contingency is to obtain funding. Other contingencies specific to your business may be included. Contingencies are normal and provide the buyer with the ability to “check out” the business before closing.
- Â Keep normal working hours.
- Â Do business as usual. Do not let inventory levels dip below normal.
- Keep the business 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.
- Work with us and not directly with potential buyers. Always refer buyers to us. You hired us to sell your business, so let us do our job.
Remember that a negotiated deal is a deal that will close. Do not become offended by what you consider to be a “low” offer. Counter all offers on a timely basis.
FAQ (Buyer)
The reasons are numerous but include the owner’s concern about confidentiality, a lack of knowledge about how to sell, inertia, and the fact that there are few intermediaries who serve the mid-sized manufacturing distribution markets.
Although you can essentially “buy a job” in a small retail operation for less than $100,000, most of our clients are interested in acquiring a company with growth potential that will enable them to build equity and net worth. A company like that costs more. Generally, you should expect that the minimum price for a company with some momentum, critical mass and growth potential will be at least $300,000. Most of our transactions are from $200,000 to $20,000,000 range.
There are three main forms of acquisition financing:
- Seller Financing – This is the most common way small business purchases get financed. Seller financing commonly requires a 30 to 50% down payment with a Seller note for the balance of the price amortized over 5 years at 10%, but the variations are endless.
- SBA Financing – U.S. Small Business Administration guaranteed financing is increasingly common but requires a fair degree of paper work and patience. SBA guaranteed financing is actually a loan from a conventional lender, guaranteed by the SBA, which makes the lender more willing to extend acquisition financing. An SBA business acquisition loan usually requires 15 to 20% down, and is amortized over 10 years at up to 2.75 points over prime rate. SBA loans are usually only purchase money loans, not working capital loans.
- Conventional Financing – Local business banks are sometimes willing to extend purchase money and working capital loans, but usually the buyer and the business have to be very strong, or solid collateral outside the business has to be available.
- Guarantees – If you form a new corporation to acquire the business, you will probably have to personally guarantee the corporation will pay off any loans made to it. Your performance can also be guaranteed by someone else.
- Assets of the Business – The lender will usually expect to lien the assets used in the business.
- Real Estate – If the assets of the business are insufficient to fully secure the loan, additional real property collateral may be required.
- Other Assets – Ducks, pigs, vehicles, fine art work, jewels, gold bullion…there are lots of possibilities.
After observing many successful purchases, in fact, knock on wood, none of our transactions have been failures. We have seen that the skills and knowledge of senior corporate managers are very applicable to operating and growing a small company. Often, it’s like turbo-charging the business. The most consistent challenge we hear from our clients who have bought a company is not whether they are going to survive, but rather “Wow! How do I fund this growth?”
- Desire and will.
- Aptitude for business development, sales and marketing. No sales, no business!
- Sufficient capitalization.
- Financial skill (or willingness to hire the talent).
- Willingness to learn.
- Sound people management skills.
- Ability to build an entrepreneurial team.
Call Sunbelt at (408) 436-1900 or e-mail us at [email protected]
We need you to complete a confidentiality agreement, a buyer profile, a financial statement, and an agency disclosure. Click on the links to these documents to download for individual or corporate. These forms are necessary to ensure confidentiality. The seller doesn’t want their employees, vendors, and customers to know they are selling.