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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
Chris Seaman, Business Broker - San Diego County Area

Founded in 1994, First Choice Business Brokers has accelerated to become one of the most successful Business Sales Organizations in the world. Our team of agents have gone through extensive training to become experts in the field of business brokerage. Call Chris at 858-578-4111 for more info.

Abdul Jobah, Business Broker, Central Valley, Kern County

As A Real Estate Agent, I offer my clients assistance with the sale or purchase of commercial properties and/or businesses. Please contact me if you are looking to sell or buy a Central Valley business. If at any time you have any questions please do not hesitate to call me at 661-703-3916.

AJ Rana - Business Broker, San Francisco Bay Area

Professionals who understand the importance of world class business brokerage service and the value it can create. Specializing in assisting sellers and buyers with retail stores, restaurants, hospitality & lodging, manufacturing operations, distribution companies, e-commerce and service businesses.

Manjit Singh: SF Bay Area - Business Intermediary

Assistance in the San Francisco Bay Area. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429.

Rick Carlson, Business Broker - Southern California

You Will Never Feel Lost In The Shuffle. Many Brokers Simply Send Out An NDA And That's The End Of Communication. All Buyers Receive A Personal Meeting With An Ace Acquisition Specialist So They Can Recommend The Perfect Business For You. Phone Rick direct at 800-985-4939.

Steve Zimmerman: Restaurant Broker Specialist

Steve founded Restaurant Realty in 1996. He has personally sold/leased over 900 restaurants, bars & clubs, & completed over 3000 valuations. The author of "Restaurant Dealmaker - An Insider's Trade Secrets For Buying a Restaurant, Bar or Club" available on Amazon. Reach Steve direct at 415-945-9701.

Joe Ranieri, Business Broker, Orange & LA County Areas

Having owned retail/restaurant businesses for over 20 years, my interest turned to listing and selling businesses rather than owning them. I specialize tend to specialize in Orange County high volume restaurants, fast food independents and chains, bars and liquor stores. Call 714-292-5448.

Prabhjot Randhawa, Broker: SF Bay Area, Northern Central Valley

I'm a Business Advisor at Liberty Business Advisors of San Fransisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses.


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