Selling A Business: Frequently Asked Questions

BizBen.com is an online marketplace that matches business buyers with sellers of existing businesses for sale. In addition, BizBen offers resources, articles, live workshops, online webinars, a syndicated blog, and a podcast on the topic of buying and selling small to mid-sized businesses.

There is no cost to search and find businesses for sale. To advertise a business for sale on BizBen there are many different programs to sell a business.  In addition there are no costs to research resouces, read any literature, or utilize the tools to buy or sell a business on BizBen. BizBen is advertising supported with over 1200 California business brokers, agents, business owners, and small business advisors who advertise daily on BizBen.com

Yes there are. The discount to business brokers and agents for multiple listings can be viewed at our BizBen Multiple Listings information page. Over 900 California business brokers and agents utilize BizBen.com to sell their listings to over 60,000 business buyers who see listings from BizBen daily.

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Most buyers will be understand they will need to sign a non-disclosure agreement before reviewing any imformation about the sale of your business. Only a limited amount of information should be disclosed prior to determining if the potential buyer is either legitimate or capable of completing the transaction. BizBen offers advertisers an example of a Confidentiality Agreement or Non-Disclosure Agreement (NDA) in the Advertising Managment section when you log into your BizBen account.

Timing is very important. Your business should be performing well and the likelihood that your customers will remain with the new business owner(s) should be good. The less uncertainty a buyer has to evaluate the better. Buyers will reduce their bid if an important contract may be expiring soon. In addition, buyers will want to be able to accurately predict the business's material costs.  Advance planning is also an important part of making sure your business is performing well. Many times business owners manage their business expenses to reduce their taxes. Although this is certainly a legitimate business strategy, many times buyers rely on income as reported in the tax return to serve as the basis for valuing the business. Some experts thus recommend a more arm's length approach to tax accounting in the years immediately prior to the sale of a business. It is also important to allow enough time for the transaction. If the seller has time pressures, he or she may have to accept a lower price. Another factor in finding the right time to sell your business is for you personally to be prepared for a significant change. As the owner and primary decision maker, you must be willing to separate yourself from your business. Other factors over which you have less control are the level of mergers and acquisitions activity in your industry and general economic trends.

When selling or valuing a business, it's generally a good idea to recast your financial statements (determining the adjusted net income of the business). This involves examining your financial statements to eliminate the effects of (i) having run your business to reduce taxes as much as possible; (ii) engaging in transactions with related companies on a non-arm's length basis; or (iii) otherwise shifting some expenses to the business which could also be classified as personal, if any of these actions differ from how the business would have been run if it were not closely held. The adjustments can increase or decrease the balance sheet, income statement, or other metrics upon which the business is valued.

Some buyers may want to see a willingness on the seller's part to finance all or part of the sale in order to show that the seller has confidence in the ongoing prospects for the business. In other cases, the buyer is unable to get financing from any other sources. If your business is appropriately priced and packaged, the buyer should be able to get third party financing, and it should only be necessary for you to provide a limited amount of financing to show good faith. Frequently, seller financing helps the seller to get a higher overall price from the buyer. Recent tax changes may also have an impact on this decision.

You should think about the terms you are willing to accept in addition to the price. Factors that will influence this decision include your personal financial situation and the financial health of your business. You should also be thinking about whether to specify an all cash deal or to offer seller financing, and what, if any, level of involvement you want with the business after the sale. You need to be flexible and willing to negotiate to increase the chance of selling your business on mutually agreeable terms.

When selling a business, you must evaluate and demonstrate its value. This usually involves assembling and analyzing the appropriate materials. For example, the buyer will want to understand your business' operations and past financial performance. Your financial statements and tax returns will play a significant role in establishing your business' viability.

Only very basic information about your business should be disclosed to a buyer prior to their signing a non-disclosure agreement ("NDA"). An NDA can help protect the confidentiality of any information given to a buyer. Once an NDA is signed, the buyer can be given additional financial and operational information about the company in order to make an informed offer for the business. After an offer is accepted, a significant amount of detailed information will be required during the due diligence process ranging from a review of incorporation papers and other legal documents to a thorough review of accounting work papers and meetings with key employees.

In our opinion if you don't utilize the services of an escrow company, you are asking for trouble later on down the road. The escrow fee should be looked at as insurance that the deal will run smoother and items that are respresented by all parties are documented. I have heard too many horror stories from buyers, sellers, and brokers/agents who wanted to save a little money or figured they didn't need to involve a escrow service to close their deal and got burned later on for not doing so.