Learning how to sell California businesses provides an advantage of more available buyers in many cases. This depends largely on the type of business for sale and company profitability as well as many other factors. However, California is a greatly desired location for many business buyers who are looking to move to a location with nice weather and plenty of recreational opportunities near by.
Selling a Business, Preparation Can Increase the Value and Speed the Process
Buyers looking to invest in a new business rather than starting their own will have a desire to gain an understanding of the business financial stability, customer base and operational details in a clear, quick manner. It is very helpful to prepare financial reports for at least three years along with tax returns for the same years. Also, compiling a list of vendors, customers and other partners will help explain your business structure to potential buyers.
It is also helpful to know the business closing process and laws in California. The California Association of Business Brokers has some helpful information on preparing to sell a business. Owners who are thinking about selling within one or two years should begin the preparation process soon.
How Long Does it Take to Sell a Business?
A wide range of time exists between the time an owner lists a business for sale and when the keys are being handed over to the new owner. This time can vary from two months to two years. On overage a typical business sale for a company with annual revenues less than $5 million lasts between five and eight months. The sale of a business should be included in the company's long term goals at least three years ahead of time.
There are many factors to consider when selling a business and trying to do so quickly. Alcohol or other licenses that are in a business owner's name must be transferred in a timely manner. Franchised businesses may take longer to sell than an independently owned company. Shareholders, partners and other stakeholders may delay the process if they do not share the same vision of the business sale.
Confidentiality With an Investor Who is Buying a Business
There are many reasons to keep the sale of a business confidential. Vendors can become nervous about a sale because they have been hurt by other businesses who have stopped paying their bills prior to a sale. Employees can become very nervous and worry about their job stability, benefit packages and overall stress of the impending change.
Trying to sell a business without support from a professional can be done, but lends itself to potential issues with prospective buyers who may wish to go around the current owner and discuss the sale with vendors and employees. This can become a huge concern and hurt the current business profits. Using an attorney who is experienced in business sales is a very expensive alternative but is much safer than selling privately.
The best option is to use a licensed business broker. In California one of the most respected independent merger and acquisition firm covering both Northern and Southern California is Business Quest Brokers. Business brokers are licensed by state and can only list business for sale in the state they hold credentials. A full listing of other brokerage firms in California can be obtained from the California Association of Business Brokers.
Reasons to Sell a Business
Retiring is a pretty obvious reason to want to sell a business. Many family businesses are started with the intention of passing on the business to a son or daughter only to discover that no one in the family has a desire to follow in the parent's footsteps. Another reason would be to change directions in life and pursue a different venture. Some sellers make a living starting businesses and then selling them in a few years for a profit.
A business that is losing money is not always a hard sale either. Sometimes a competitor will want to buy existing customers, machinery or inventory. Buyers who are in the same industry may see an opportunity to buy a company that is loosing money and turn it into a profit center by consolidating some or all of the operations.
Types of Business Sales
Businesses can be sold outright with a single payment from the buyer or buyer's lender or it can be owner financed which is more common. Many buyers feel a greater sense of comfort knowing that the seller has confidence that the business will support the amount of the payments.
The owner may be asked to stay on as an advisor or in a more senior full time role for a period of time and be compensated. A buyer may also agree to pay out a percentage of growth for a period of time to the seller based on preset milestones. This is called an earn out.
Selling a business takes research, full disclosure of assets and liabilities, confidentiality and often personalities must mesh well between the buyer and seller. Using a professional who has experience to make this transaction work smoothly is highly advised.
W Denis Nurmela - - Built multi-million $ companies from scratch - Church & Non-Profit Leader - Educated & Avid Reader - Coach, Consultant, ...
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