Are you looking to sell your business? Even if your business has great qualities, if the terms of the sale are not reasonable, then you might have difficulty selling the business.
The buyer has the sole authority when deciding to buy a business, and will critically compare your business with the other competing businesses out there in the market. If your terms aren’t realistic and reasonable, the buyer may lose interest in your deal and might end up buying another more promising business.
In order to sell your business, you need to be reasonable and realistic regarding a few terms like the selling price, the amount of down payment you want, and the mode of money transfer. Signing an agreement such as non compete and promising to provide training and transitions would help to take the buyer into your confidence.
Here is a list of five terms which you as a seller should be reasonable about while keeping in mind the expectations of the buyers and your dos and don’ts while selling your business.
- High price kills the deal :
When you put your business up for sale, the price is the first and foremost criteria for a buyer to decide whether or not to buy your business. The higher the cost that you sell the business for, the lower the chances are of attracting potential buyers. This is because there are several other businesses competing on the same grounds out there in the market, providing the buyer with a fair comparison.
In some cases the buyer may get an independent appraisal. This means that the buyer himself may conduct a valuation of your business. In doing so, if the price comes out to be less than that of the deal price, the buyer may ask for a lower price.
Having a prime location is a crucial factor in determining the price. So if you have a business for sale in Miami or another locale with a hot market, then you might be able to get away with pricing your business a little higher than an independent business valuation.
- Do not expect an all-cash buyer :
Expecting that your buyer will be an all-cash buyer is an unrealistic expectations. Most buyers are leveraging money by taking loans out to buy the business.
On the other hand, buyers who have enough money to buy the business outright would rather invest their money in a large business and use their money as a down payment. Certainly, the number of all-cash buyers is comparatively less among the potential buyers you’ve contacted or have been approached by.
- Amount of down payment should be less:
You should keep in mind that the amount taken for the down payment should be considerably low. In order to facilitate the sale of your business and attract more potential buyers, the amount of the first installment should be less, thus providing the buyer with a way to ease into the business. Setting a hefty down payment might turn out to be a troublesome factor when selling your business.
- The inclusion of a non compete may help take the buyer in confidence :
A non compete can be termed as an agreement between the seller and the potential buyer under which the seller can’t operate a competing business with the same consumers or in the same market area for a period of between 3-5 years. It even prohibits the seller from hiring the same employees. This will attract potential buyers by building their trust and will help increase the chances of the business being sold.
- Assuring the buyer with training and transitions :
The seller should be realistic with the training and transitions he is willing to provide the potential buyer with. This depends upon factors such as the skills the buyer possesses, the complexities of your business, availability of other people, and the resources needed to provide training. Expecting to be paid for the time and effort the seller puts in is reasonable, but the amount paid by the buyers might not end up being up to your expectations.
Having taken all the above points in consideration, you will easily be able to sell your business with a handsome return. If you are searching for a potential buyer and do not know from where and how to begin, just step into the shoes of your buyer and think from their perspective. If you were the potential buyer, what terms and conditions would you have expected if you were to buy a business? Once you do this, you’ll know what steps to undertake so as to attract the most potential buyers for your business.
