FREQUENTLY ASKED SELLER QUESTIONS
This is a complex question. Many items must be taken into account so a qualified Business Broker can determine a reasonable value. This will require review of Financial records, a risk analysis, and other multipliers to determine the best type of sale for your enterprise.
We normally see advertising and data base interest within 60 days. The average deal could take 4 to 6 months. Normally, deals will die and re-kindle themselves several times during the course of negotiations. It is not uncommon for deals to take 6 months or longer.
We value a clients confidentiality. Advertising will be as non descript as possible. We can not guarantee that employees or cusomters will find out. We can promote through data base methods only, however, this could cause delays and longer time tables in finding the right buyer.
We require tax returns, profit loss statements, balance sheet, equipment lists, account payable account receivable and the lease to start the process.
Deal structure could be determining if the enterprise could be sold as a bulk asset sale, stock sale, earn out, note, etc. Also, terms and conditions and exit plan strategy.
Bulk Sale in the State of California allows a buyer to purchase the assets with no liability. Stock sale is purchasing the balance sheet, equity, a/p and a/r in most cases.
This is a CPA question. If you do not re-invest in like kind acquisition, and you have made a significant profit, you may have capital gains.
In most bulk sales, the only liability a seller would have would be if they were unpaid claims by vendors or resources. Lease liability as a secondary guarantor if the lease is assigned is most likely.
Tax Returns and schedules, (normally 3 years) with profit loss statements of the same period. Current YTD profit loss statement, and last years profit loss for the same period. A/P, A/R, Balance sheet, inventory, equipment list with estimated current value as used. Any liabilities which may not be transparent, and a copy of the lease or property profile if seller owns real estate.
We use weighted averages, risk assessment, lease benefits, look at ebit, ebita, sellers discretionary earnings through a financial recasting, and equipment value. We then take a multiple of value based on these findings to come up with an enterprise value which should be used as a starting point.
At MaxOne Business and Commercial we specialize in Leasing and Real Estate valuation. Unlike other business brokers, we represent the interests of the transaction because the lease or real estate is one of the heaviest weighted items having to do with profit.
Depends on the deal structure, and if the buyer is seeking to purchase without bank financing. Sometimes books and records restrict the amount of financing available. SBA lending will occasional ask that a seller also carry a partial stand by note for a short period of time.
Payroll and EDD must provide clearance and sellers permits must be replaced by the buyer unless this is a Stock sale. Keep in mind, any stock sale will still require a lease assignment.
It takes just as much time to sell a $20,000 company as it does to sell a $500,000 company. Our minimum commission is $12,000, against a posted average commission rate of 10% of the gross sale price. In some cases, distressed business bail outs can be negotiated.
FREQUENTLY ASKED BUYER QUESTIONS
Financing depends upon a buyers initial capitalization, type of transaction. SBA occasionally wants the seller to carry a Stand By note. If the buyer is well qualified with specific industry experience and credit, a seller may elect to carry a note.
This is part of the buyer and seller disclosure statements.
Asking price can be determined two different ways: First is the amount a seller thinks their business is worth, and second would be based off a proper valuation.
Bulk sale escrows can very rarely be completed within 45 days.
Normally, all listings and sales start as a bulk sale (asset sale) but occasionally and could convert to a stock transition after due diligence and validation of debt, liability, and H.R. investigation.
This depends on the transaction itself. If the deal will be financed, a buyer should be prepared to spend at least 30% down, escrow fees, and possibly landlord assignment fees for the lease. However, SBA 504 loans normally only require a 10% down payment.
Purely as a standard practice, a buyer should have capitalization in reserve to support any shortfalls of a business during a ramp up period.
Most bulk sales do not offer earnouts. However, sellers will consider carrying a note but not tied to performance.
Yes, we can certainly attempt to renegotiate a lease, or in the event the seller owns the property make an offer or first right of refusal to purchase real property.
It is said that the SBA looks at financial records of the seller and performance, cash flow, and profit of the company, and account for 65% to 75% of the approval process.
Normally, a buyer will want a seller to provide 1 to 2 weeks of training unless the exit plan strategy is for a longer term.
Covenant not to compete is normally subjective and can be from 2 to 5 years, or based on geography.
That is a due diligence question and is a very important one. Normally, yes. In a bulk sale, the buyer will have to re hire everyone.
In a bulk sale, normally NO. Sometimes in the listing agreement the seller will include up to a certain amount of inventory and must balance out any difference in the closing sale price.
Normally, commissions are paid by the seller. Over and above research or strategic planning may be a fee directly charged to the buyer as a consulting fee if deemed necessary or appropriate.