The first contact CBB makes with the market of buyers for your business is via a blind (anonymous) profile of your company. Your location is described in general terms and so are the details of your company. Key financials are presented as well as a description of your products and services, along with its opportunities for growth. Your company is not identified in the profile. By hiring CBB, who is responsible for preparing the documentation and handling the marketing process, you can ensure that the process remains confidential.
This also allows you the freedom to continue to focus on running your business throughout the sale process – a key aspect of maximizing your closing price. CBB’s trademarked process maintains your confidentiality by only releasing information about your business to qualified buyers who work under our confidentiality agreement.
Yes. For most small businesses CBB does not charge upfront fees. We will do a free value assessment that will give you a value range that you could expect in the marketplace. We do this before we contract to list your business for sale to make sure your expectations are realistic. Call us or simply complete our strictly confidential Free Value Assessment Form and we will contact to discuss value.
According to the 2016 report for the Greater Houston Metro area by BizBuySell from data provided by Business Brokers, 580 businesses were listed for sale, but only 21% were sold. Unfortunately, this is not surprising, this statistic is normal. Historically, only about 20% to 25% of businesses that go to market actually sell. Even of firms that are considered mid-sized (businesses with sales of $10 to $50 million and 100 to 500 employees) only 50% will sell.
National statistics indicate the average time on the market for around 82% of businesses is four to 12 months. Fewer than 10% of businesses sell more quickly, and about 8% are on the market for more than 12 months. Price and terms of the sale have the biggest impact on timing. Documentation and records are also a factor.
One year minimum. National statistics indicate that on an average, businesses are sold within four to 12 months.
There are many reasons, but here are a few dominant ones.
1) Overvaluation. Many sellers want to “test the waters” and overprice the business. Today’s buyer is educated and usually business-savvy. There is so much pricing data available. Buyers know when a business is overpriced.
2) Sellers are not willing to finance a portion of the sale price. If the business does not qualify for SBA lending, most buyers are not willing or are unable to pay 100% cash to make the acquisition. In many cases the seller will be called upon to assist in the financing. Studies have shown that sellers who are willing to finance a portion of the purchase price will receive a higher price.
3) Declining business revenues
4) Sellers are not willing to negotiate
5) Inaccurate financial records that don’t pass buyer’s due diligence.
6) Sellers get cold feet and withdraw from the market.
7) Sellers, too often, listen to well-meaning outside relatives, friends or advisors who really don’t have sufficient knowledge of the selling process. Sellers who don’t use a professional business broker/intermediary are at a disadvantage. These outside professionals know the marketplace and greatly assist in finding the right buyer. They are a “value-added” service and will more than justify their fee. The seller who represents himself or herself will almost never get the price that a business broker professional will obtain.
8) Landlord issues – After a buyer and seller have “negotiated” a deal is that the landlord cannot come to terms with the seller and/or buyer.
9) Financing is not available
When I sell my company do I also sell the property it occupies, or would I lease the land and/or buildings to the buyer?
Either way is possible. You may receive offers for just the business with rental income to you, as well as offers to purchase the business along with the real estate. You can choose whichever option you prefer. Depending on the type of buyer your business would most likely bring, you may want to consider the purchase of the property as an option for the buyer in order to widen the pool of prospects. If you own the property, read our blog article about How The Real Estate Is Handled When Selling Your Business.
Based on the size and type of business, the current owner typically stays on for a period of two to four weeks to train and insure a smooth transition. Larger acquisitions require a longer period of time. It depends on how the deal is structured. Typically, in an extended transition, the former owner’s compensation is negotiated based on an estimate of how much would be needed to pay someone in the market to replace you.
Most closings for small businesses take place in our office. However, for larger acquisitions it depends on the attorneys and the logistics of the parties involved. They can be done in one of the attorney’s offices, or wire transfer, conference calls, email and faxes.
You should not prematurely tell your employees. There will be a right time, but if you are in the beginning stages of considering selling your business, the actual sale could be a year away. Your key employees could begin looking for work, most likely at your competitors. The value of your business could be affected by losing key employees. In addition, key customers could find out the status and begin looking for a new vendor if they are uncertain about the future.
Financial data we review includes the past three to five years of:
- income statements
- balance sheets
- tax returns
- equipment list and appraisals
- property/building appraisals
- business summary questionnaire and checklist that introduces us to your business
We operate in what is called the small business to lower-middle market range.
CBB provides all the services required to sell a business, from initial valuation through closing. If you sell the company while under contract with us, you are still obligated to pay the commission in the engagement contract. The service we provide includes sourcing buyers and negotiating the deal, so if you have a buyer in mind, it is extremely important to refer them to us. We will provide professional representation with all buyers so you can concentrate on running your business.
If now isn't the right time to sell my company, what should I do to prepare my company to eventually go to market?
If CBB prepares a valuation assessment and you later determine that now is not the right time to sell, we will discuss the areas you can address to add value for the future.