Frequently Asked Questions
As buying or selling a business is an activity that infrequently occurs for most business people and is thus a not well understood process for most, we encourage our clients to freely seek our input throughout the entire process. Although no one source can answer all of your questions, it is most important to gain insight into the sale and purchase process so that you can anticipate the questions and issues that will likely arise and have both a sense of how these should be approached and what specific professional resources you should have on your team to support your efforts to acquire or sell a business. Let's us help you understand and successfully navigate through the process.
How Does a Broker Maximize the Value You Receive for Your Business?
Beyond the inherent profitability of a business, there are many other factors that come into play in determining the final selling price. Many of these factors, including exposure of your listed business to the broadest spectrum of prospective buyers, selling prices of similar businesses, support for the substantiation of the asking price, available financing for the sale, etc., all come into play in setting a business' value and all can be substantially influenced and supported by a capable business broker.
How Is a Business' Value Determined?
Smaller businesses are often valued by using an industry multiple times the seller's discretionary earnings and by temporing this with values received for similar businesses in recent sales. For larger middle market businesses, offers are generally solicited from investment groups or industry competitors who independently value a business based on their ROI criterea or their desire and need to expand or broaden their product/service offering.
How are Businesses Marketed?
The best way to sell a business quickly and for the best possible price is to promote it broadly before a wide spectrum of potential buyers. Cabot Business Brokers achieves this for its clients by numerous channels: internet advertising on leading websites, email notifications to a database of over 1,500 buyers, advertising on our website, contacting potential industry buyers and networking throughout our brokerage industry.
How Long Does It Take to Sell a Business?
The best business sales occur when buyers are found that not only are financially qualified, but that also have the specific industry knowledge and experience to understand the business they are acquiring. For most businesses this process of identifying the right buyer generally takes from six to twelve months. Larger businesses that retain senior management and are less dependent on the new owner's industry knowledge and contacts tend to have shorter sales cycles.
Do I Need an Exit Plan?
There are two overriding reasons why sellers should develop an inclusive exit plan. First, an in-depth review of a business can yield a number of issues that if addressed will increase the value and desirability of your business. Secondly, there are numerous issues that can be anticipated in the due diligence process, such as a review of lease restrictions, financial records, etc., that if proper addressed before the business is listed, will yield a smoother business review and sale.
How Do I Finance for a Business Acquisition?
Buying a business requires at minimum a substantial downpayment which is generally used in conjunction with an SBA or institutional loan, as well as working capital to support the business until the sales cash flow picks up to its steady state. All serious buyers should develop a business plan and attendent cash flow spread sheet, both of which are generally submitted with any loan application. In some circumstances, the seller may be reasonablly expected to hold some debt to ensure their continued support to the transition or as a guarantee that the current level of sales will continue even after their departure from the business.
What Are the Tax Implications for a Business Sale?
Tax considerations are always a factor in deal structure and always of concern to the buyer and seller. It is highly recommended that both parties of a transaction consult their accountants or financial advisors early on to best understand how to structure the sale. Because all businesses have financials unique to them, only qualified financial advisors familiar your business can answer these questions and give you guideance in this area.