FAQ
Frequently Asked Questions
Business Owners
Frequently Asked Questions
Business Owners
Copyright © 2014 Zeta Inc, Colorado Business Sellers
Q: What will my business sell for?
A: We will, at no charge, give you a very good estimate of your business' value and an expected selling price. All we require from you is access to your last three years business financial records: business tax returns (we never look at personal returns), P&L's and a current balance sheet. The easiest way to get us tax returns is to have your accountant e-mail them to us. That way you don't need to take the time or expense to make copies and mail them. WE DO THIS IN STRICT CONFIDENCE. NO ONE WILL SEE YOUR TAX RETURNS or FINANCIALS.
Q: My tax returns don't show very much profit (or they show a loss) but my business makes more than my returns show. Do you understand how to determine the true cash flow of my business?
A: Yes, we get it. Almost all businesses are this way. To your bottom line profit or loss we "add back" expenses such as depreciation, interest, owner's salary, amortization and "discretionary" expenses such as donations, auto, phone, travel, health and life insurance etc.
This total dollar figure is commonly referred to as cash flow, seller's discretionary earnings (SDE) or owner's benefit.
Your business' selling price is based on cash flow. After all, people ultimately buy a business for one reason - income.
Q: Will my business sell even if my tax returns don't look so hot?
A: YES! We walk buyers through the "cash flow" analysis so that they understand what the true income of your business is. Tax returns primarily come into play when commercial or SBA financing is required. That subject is addressed in questions below.
Q: I don't want my employees, competitors or customers knowing my business is for sale. How can you assure me that no one will find out my business is for sale?
A: We advertise your business in very generic terms such as Denver Area Wholesale Company or Front Range Manufacturing Business.
When a buyer requests more information we will inform them that they must register first. The registration process requires all buyers to agree to a non-disclosure form. Only after registering do we send them information on your business. We have never had a problem with word getting out that a business is for sale - "We Sell Secrets."
Q: I know a Realtor who would like to sell my business. Are you pretty much the same as a real estate agent?
A: No, there is a big difference between a Business Broker and a Realtor. Please click on this: Realtor or Business Broker?
Q: I don't want people seeing financial details of my business if they can't afford to buy it.
A: Before sending out confidential information like your business' tax returns we always financially pre-qualify all prospects.
Q: I am seriously considering selling my business myself so why do I need a business broker?
A: Please click on the following link for a good explanation of why enlisting the services of a professional business broker is the key to a successful sale and closing: Why a Business Broker?
Q: How much do you charge to sell my business?
A: We are paid 7-9% of the final selling price at closing. We never charge any up front fees (like some business brokers) for things like "marketing packages." We get paid when you get paid. If we don't sell your business we make nothing, in fact we lose money - we're motivated!
Q: How are you able to find a buyer if you can't tell anyone?
A: We have several sources for finding buyers: Buyers who have already registered with us and who are still in the market, other professional and personal contacts that we work with and via extensive advertising. We spend a very large amount per month on targeted Internet advertising - not just on our own web site.
Q: How long will it take to sell my business?
A: Two to ten months in the current market is typical.
Q: Is it possible to sell my business for cash? I have heard financing is tight.
A: Yes, there are cash buyers in the market, however the majority of deals are now a combination of cash and seller financing. And yes, obtaining institutional financing (SBA or commercial loans) is more difficult than it was a few years ago.
Q: I really would like all cash for my business, I don't want to carry anything.
A: If you insist on all cash then you have immediately eliminated a large pool of legitimate buyers. This is especially true if your business will sell for over $150,000. Buyers, like everyone, are trying to leverage their money.
A serious buyer often becomes suspicious of a seller who refuses to carry any of the purchase price. They typically interpret this as, 'the seller wants all cash because they don't think their business makes enough for me to pay them back.' Of course, this is not the reason you would like all cash but unfortunately many prospective buyers will see it that way. We work with these people and are usually able to help them understand that business sellers prefer cash for obvious reasons.
Please keep an open mind on financing part of the purchase. There may also be tax advantages for you to do so, check with your accountant. Of course, our goal is to find a cash buyer but that is not always realistic.
Q: Can potential buyers get an SBA loan to buy my business so I can be cashed out?
A: Yes, if your business shows sufficient cash flow on your business tax returns. The absolute key element to a buyer receiving SBA loan approval is your business' tax returns must show adequate cash flow. This is a VERY IMPORTANT point: The tax returns must show that there is enough cash generated by the business, after all expenses, to support the buyer and his/her SBA loan payments. Also, most SBA lenders are now requiring sellers to carry a minimum of 10-15% of the selling price. We would be happy to discuss this with you personally in further detail.
The other part of the qualifying equation is on the buyers side: Does the buyer have good credit, substantial funds and experience in the industry he or she is buying into? Prior experience has become a biggie with banks who do SBA loans. There is some flexibility here but an experienced buyer or a buyer who has other business management experience is considered a big plus to lenders.
Q: So are you saying there is no way at all someone can get a loan to buy my business if my tax returns don't show good cash flow?
A: No, a buyer can increase their down payment or in some cases pledge additional collateral. We have a lot of experience with SBA loans and can help your buyer find a way - finding a way is a big part of a business broker's job.
Q: What do buyers look at as far as my financial records and due diligence?
A: Profit and loss statements, balance sheets, included furniture, fixtures and equipment (FFE) and tax returns. We have never sold a business without a buyer doing a thorough exam of the tax returns. Buyers (and banks) consider tax returns as the most reliable and accurate measure of your business.
Q: My tax returns don't look so great even with add backs so I may not be ready to sell right now. Could you give me some guidance on what I need to do to get my records up to snuff in order to receive a fair price for my business?
A: Yes, we do this often (at no charge) and would be happy to help.
Q: I own my building and would like to sell it along with my business. Do you sell real estate?
A: Yes, we are licensed real estate brokers and have sold a business and the real estate many times before.
Q: What are the basic steps in selling my business?
1. Appraise the value of your business
2. Learn all aspects of your business' operations so we can answer prospective buyer's questions in a timely manner and effectively communicate to them the value of owning your business.
3. Sign the listing agreement
4. Prepare marketing materials
5. Market the business confidentially
6. Pre-screen potential buyers - LOTS of screening!
7. Present an Offer to Purchase the business
8. Assist in negotiating the Offer to Purchase and earnest money
9. Assist in securing financing when available or necessary
10. Work on contingencies such as business financial record review, lease transfer and approval, real estate inspections if applicable, any licensing that is required and other issues that may arise.
11. Resolve all issues that come up during the due diligence process
12. Work through all contingencies and have all contingencies removed prior to closing
13. Relay all pertinent information to the closing attorney, seller and buyer.
14. Closing attorney prepares all closing documents
15. Send all closing docs to the Seller and Buyer for their final review
16. Close the deal and Celebrate - our favorite part!
Have more questions?
Please call Cory Johnson, Managing Broker, at 970-217-0149
or email cory@cobizsellers.com
I would be very happy to help you - confidentially.
Are You Thinking of Selling Your Business?
If you have been thinking, 'maybe it's time to sell my business,' then you've come to the right place. We understand that before you can make a final decision to sell, you first need to gather information on how best to go about it.
In order to help you reach a decision we have posted the most common questions we receive from business owners just like you.
In order to help you reach a decision we have posted the most common questions we receive from business owners just like you.
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Colorado Business Sellers
