Selling A Company
3 Questions To Ask Yourself
When Selling Your Company
1.
Will You Finance Part Of The Sale ?
Maybe a better question is, how much will you finance when selling
your company? If your like most sellers, you'll finance at least
a portion of the sale when you sell your business If your unwilling
to help with the financing, be prepared for a longer sales process
and probably a lower price.
The
good news is: you only have to offer short term financing when
you sell your business (5-7 years is typical). The loan can
be amortized over a much longer period, so at the end of the
loan term there is still a sizeable amount of principal remaining.
But 5 years after selling your company, the new owner should
be well established in his business and will be in a better
position to obtain his own financing. He can make a single "balloon"
payment to pay you off at that time.
How To Protect yourself when you sell your company
What
happens if you finance part of the sale of your business and
the new owner is not a success? How do you make sure you get
your money if the new owner goes bust? Here are several things
you can do to protect yourself against the worst case scenario:
Background check - Before you sell your company you must
check out the buyer's background. Your research should include,
but not be limited to, credit reports, personal assets, work
experience and personal references.
Life insurance - You can have the buyer take out a life
insurance policy with yourself as beneficiary.
Additional Collateral - If the buyer has a personal residence
with significant equity, commercial real estate or other investments,
you can ask him to put them up as collateral.
Personal Guarantee - Just like a bank, you can require
the buyer to personally guarantee the loan when you sell your
business.
Sales Contract - Depending on the circumstances when
you sell, you may want to restrict the new owner's acquisitions,
expansions and sale of assets until you are paid in full.
2.
What Is The Minimum Down Payment You Must Require?
Price
is not the only item that you will negotiate when selling a
company. In fact, it may not even be the most important. The
size of the down payment, interest rate and length of re-payment
can all contribute to a very successful sale.
Once
you've decided to sell your business, determine what kind of
down payment you'll require. Consider these expenses that you
will face after selling:
·Taxes
- sales tax, stock transfer tax, real estate stamp tax, and
other taxes due at the time of the transaction.
Loans
- you'll need enough after tax cash to payoff those business
loans not assumed by your buyer.
Fees
- appraiser, attorney and accountant's fees, and in some cases
broker's commissions.
Regardless
of the amount you need when you sell a business, you always
want a substantial down payment so the buyer has a serious stake
in the business. The more of his own money he has invested in
the business, the less likely he'll be to bail out on you if
things get tough. Banks will require 25-30% minimum down payment
from a buyer to approve a loan. When you sell your business
you should set a minimum down payment at the same level or higher.
3.
What Role Will You Play After The Sale?
Unless
the buyer has experience in your type of business, he'll probably
want you to stay on for the short-term, while he gets comfortable
in his new business. Often, successfully selling a company requires
that you commit to a training period.
Decide
now what role you are willing to play after you sell . Will
you stay involved on a daily basis for 30 days, 90 days, or
not at all? Will you play the role of an outside consultant,
and if so, for how long? Will you consult in person or only
over the phone?
Unless
you find that rare all cash buyer, you're going to be tied to
your business to some extent after you sell until the buyer
pays you off. Not only is it fair to ask the seller to advise
and consult in the short-term, it's in your best interest to
be available to help the new owner while he learns the ropes.
It might be the key that helps you sell your business faster
and for more money.
More
Articles About Selling A Company:
Why
Confidentiality Is Important When Selling A Company
What
Business Buyers Want
How
To Sell Your Company - 4 Important keys
Why
It Is So Hard To Sell A Company?
Do
You Need A Business Broker To Help Sell Your Business
How
To Choose A Business Appraiser
To
find out how TheBizSeller.com can help you sell a company fast
with pre-qualified buyers and guaranteed confidentiality
go to:
Selling
A Company
