Statistics indicate approximately 70% of searches actioned by searchers looking for a business for sale are now conduct on the internet, and the sheer number of available companies can be overwhelming. However, regardless of the road you take, you should be able to find what you are looking for in about six months. The trick in narrowing down the search is concentrating on the industry that is right for you, based on your personal choices, your ability and your weaknesses.
Determine how much you can afford to invest in a business and be realistic in your search. Occasionally more than 90% of small business sales include funding by the seller, which is around about 40% to 50% of the sale price. Also, at some point during the buying process, you will be asked to prove your financial situation. It should consist of your assets and liabilities, including your net worth and verification of your credit rating.
Once you have decided to invest in a business for sale, you will want to weigh the advantages and disadvantages before you sign on the dotted line. The process includes analysing the business, evaluating it and negotiating to buy it.
Assessment
At a minimum, this involves reviewing the company’s audited balance sheets, profit-and-loss statements and income tax returns for the past three or more years. It should include reconciling the taxable income with the profits for every year, and you will also want to assess their resources such as product, property, equipment and employees.
Consider the current status of the business, does it have potential for future growth, its competitors, and the method and expense of delivering products and services to your customers. Above all, base you decision on whether the business is part of a growth industry or one that is is in decline. Also, as an important measure, you will want to have your accountant and lawyer assist you in these matters.
Evaluation
When evaluating, you should focus on the potential of the company, which will help you to make cash-flow, sales and profit projections for at least the following year, before you proceed any further
Negotiation
As a rule, a business isn’t sold for the asking price. Instead, negotiation between the buyer and seller is needed to determine the sale price (and the related terms) to ensure that the buyer and seller will feel they have been dealt with fairly. Customer goodwill is important factor in buying businesses, and be sure that you are presented with the information to support the seller’s claim of its value.
Selling a Business
Owners sell businesses for may reasons, such as planning to retire, and you will want to proceed carefully and take the following steps:
* Be sure that your financial records are available and updated, and be ready to provide pertinent information to your potential buyers. At a minimum, they will want proof your company’s audited balance sheets and profit-and-loss statements for the past three years. Providing your lease statements and tax returns will also be helpful, along with current balance and payment schedule if you are paying off a business loan.
* Once you have produced the documents mentioned above, this will give you some idea of what your business is actually worth. In addition, you will probably want to meet with a financial analyst to determine its fair market value.
* If you want to sell your business quickly, make sure that the deposit you require is very affordable. You might also want to provide seller financing in this situation to facilitate the sale, and if you do, the buyer will agree to pay a agreed amount over an agreed-upon time period.
* While your business is on the market, try to increase your customers with special promotions and discounts, and be ready to provide potential buyers with relevant documentation related to your employees and suppliers. Stay away from any significant interruption in your day to day business activities as well.
* Resolve to treat the acquisition of your business as a confidential matter. If they discover your plans, your customers and suppliers might conclude that you are in serious financial difficulty, which could interfer with future sales figures. Also, your staff might start looking for a different job and leave without waiting to see if the new owner is willing to hire them.
* Develop a good report with all potential purchasers, but remember to screen each one as well to avoid problems and misunderstandings. A competitor might even assume the role of a potential buyer to try and find out useful or private information about your business. To avoid this, ask your legal team to create a confidentiality agreement that you can use with interested parties who inquire about the sale.
Remember that selling a business privately can save you quite a substantial amount in agent commissions, it’s not that difficult to do, and potential buyers are very receptive to this method. To sell a business privately, list your business on business for sale websites and in your local newspaper.
About the Author
If you are interested in private businesses for sale please visit Business Trader – Buy and Sell Australian Businesses.