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Selling A California Business - 13 Crucial Steps


Selling A California Business

Overall only 30% of all small businesses for sale throughout California that are put on the market (either formally through advertising or informally by "getting the word out") are actually sold!  A surprising statistic to most small business owners, agents, and certified business brokers trying to sell a small to mid-sized California business!

Consulting (ProSell Program) with owner/sellers, brokers, agents, and intermediaries throughout California on a daily basis I see owners/brokers/agents not following the advice below and usually they are the ones ending up not selling their business and being part of that 30% statistic listed above.

If however you follow the steps and tips below (and follow the "ProSell Program" of selling a California business) your chances of selling dramatically increases!

Have All Records Ready Before You Go To Market!

Have these items ready before the business goes on the market to be sold: The last 3 years of federal tax returns for the business being sold, the last 3 years of financials (profit & loss statement, balance sheet), the last 3 years of monthly bank statements, copy of current lease, list of all equipment being sold with the business, etc - many parties during the selling process will need this info - serious business buyers, your landlord for a new lease for the new buyer, lenders (for a possible loan/financing for the buyer, note buyback firm (in case you want to sell the note for cash after the business sells). Also make sure you know what the correct adjusted net income has been for the last 3 years. Serious business buyers will want to know this.

Have A Professional Business Valuation Performed

Getting a 3rd party professional business appraisal/valuation is important and critical for the process. 70% of all businesses NEVER SELL usually due to too high of price (and/or a bad deal structure) placed on the business being sold. Getting a professional 3rd party valuation is well worth the expense and will be utilized by many parties during the selling process: possible business buyers, lender/financing companies for the buyer, and others.

Keep A Folder Of All Info/Contacts

Keep a folder of all contacts, notes, and paperwork for your small business for sale transaction. Keep a log of all buyers who contact you - get their phone numbers, email address and keep notes about them (this will come in handy down the line, trust me). You want to make sure you have backup buyers in case your first choice drops out during the selling process. Keep all escrow info, purchase agreements, signed non-disclosure/confidentiality forms, contact phones of CPA's, Attorneys, etc. and other pertinent data/info in this folder!

Write Up A Comprehensive Summary Of The Business

Buyers are going to need to know many details about the business being sold. Instead of having to re-explain to many buyers about the business (and probably forgetting many important facts) make a one page summary of the business being sold. Include: History of the business, date established, number of employees, important attributes about the business and surrounding area, what you would recommend to a new buyer to increase business once they take over, what geographic area the business covers, the competition, the reason for selling, how much training will be provided after the sale, etc.

Confidentiality Agreements Are Important

Have all potential business buyers sign and date a Non-Disclosure/Confidentiality Agreement before giving out any info. Make sure potential buyers understand how important it is to keep the sale of the business confidential and that there are legal ramifications if they don't.

Get Controlled Maximum Exposure On The Sale Of The Business

One of the most important items is to make sure that many, many buyers (ones that are qualified to buy) see the business is for sale. Expect to spend $400-$1000 for advertising and marketing  (BizBen Fast Track/ProSell Program) to sell your business to adequately get the word out to the right business buyers. Yes it does only take one buyer to buy a business, but you want to make sure you have multiple business buyers (and backups if possible) ready to go!

Get The Business You Are Selling Pre-Qualified For Financing

You are probably saying "that is the buyers responsibility to do this!" You couldn't be more wrong. This is a critical step in insuring that possible buyers can get SBA loan financing in the first place to buy the business. This is highly important, since if a buyer can't get financing from a lending institution that means the owner will have to take back a note, or sell the note after it sells for a discount etc. By doing this step early you will know what some very important options will be for potential business buyers without a lot of time being wasted - and TIME KILLS DEALS!

Keep The Negotiating & Communications Moving Forward!

Remember - TIME KILLS DEALS. Make sure when you are negotiating the contract, allocation of purchase price, new or restructured lease, etc. always be moving forward. Don't let any situation sit too long - it will most likely kill the deal!

Get The Signed Purchase Agreement Into Escrow

Get the signed purchase agreement into escrow immediately and sign off any contingencies quickly - remember TIME KILLS DEALS. Make sure you go through the Allocation of Purchase Price in the beginning of the escrow process not at the end which happens most of the time.

Due Diligence By The Buyer Should Not Last Forever!

Due diligence by the buyer should only last 4-14 days. Since you are going to be organized and ready with all important info and documents, this is all the time any competent business buyer (and CPA for the buyer) should need to investigate the business for sale. You do not want the business off the market for a prolonged period so be firm about the length of time for due diligence - get it in writing (purchase agreement) and make sure all parties to the transaction stay with the schedule!

The Business Is Not Sold Until You Have Check In Hand!

Always continue to collect names of business buyers and their phone numbers etc. even if you are in escrow (50% of all deals fall out for one reason or another!) You want to make sure you have a successful deal and a business buyer that is going to complete the deal. Try to have 2-3 potential business buyer back-ups who are willing to take the buyers place within the escrow should the current business buyer drop out.

Keep A Positive Attitude - It Will Happen!

Keep calm and a have a positive attitude. By following these steps (and utilizing the bizben Method of selling a business) you will definitely find a qualified buyer for your business! Things happen pretty quickly when selling a business. If you are prepared, follow through with all buyers professionally and keep up on the selling process, you will be successful!

Peter Siegel, MBAAbout This Author: Peter Siegel, MBA is the Founder & Senior Advisor (ProSell Program) at BizBen.com (established 1994, 8000+ California businesses for sale, 500 new & refreshed postings/posts daily) he consults daily with California owners/sellers, brokers, agents & intermediaries. Reach him direct at 866-270-6278 to discuss strategies selling a California small business.


Categories: BizBen Blog Contributor, Deal And Escrow Issues, How To Sell A Business


Comments Regarding This Blog Post


And, here's the critical 14th critical step -- keep running and growing the business up to the very day of the closing. Don't presume the business is sold until the "check has cleared." Many a business has lost significant value because the seller "retire in place" when the contract was signed ... and then the deal fell through.


  Helpful Resources To Assist In Selling And Buying California Businesses
William Park, Business Broker - Southern California

Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible.

Joanne Weber, Broker - Preschool Specialist - Southern California

The Ryan Craig Company is in its 35th year as the recognized expert in Southern California, dealing exclusively in the sale of preschools, Montessori schools, day care centers, and private schools. Our extensive list of references speaks for itself. Phone Joanne at 818-760-3684 for more info.

George Lanza, Business Broker, At Plethora Business Sales

Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses.

Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.

Michael Floorman, Business Broker, BTI, San Francisco Bay Area

Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.

Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance

For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.

Matt Weiler, Business Broker: Gas Station Specialist

Business Broker Specializing in primarily gas stations. Geographic area of focus: San Francisco Bay Area to Sacramento and as far South as Monterey, California. To sell or buy a small or large gas station phone Matt (gas station business broker specialist) direct at 408-623-0920.

Harry Sidhu, CBB, Broker - SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.


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