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5 Myths About Selling A Small Business In California


Five Myths About Selling A Business

To successfully sell a business, you should be educated in the process.

You should also surround yourself with a team of experts, including a professional business broker or agent, that help guide you along the way. There are many myths associated with the process of selling your business and some of them can actually cause deals to fall through.

Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling your business.



Myth #1 - Lenders aren't lending so I will have a difficult time selling my business

While it is true that the scope of business purchase financing has changed, lenders are still granting loans to qualified buyers. The key to a buyer getting a loan is preparation. As the seller, there are several things you can do to help with the process, which I'll discuss in myth #2.

Myth #2 - It is the Buyers responsibility to deal with business purchase financing

It's true that the bulk of the responsibility to secure financing falls on the buyer but as the seller; you can help the situation by getting the business pre-approved for financing.  This will give the business credibility with other lenders and will hopefully make your buyer's quest for business purchase financing easier.  The other thing you can do as a seller is to offer some sort of financing yourself.  It is becoming standard that business owners hold some portion of the note on the sale of their business.  It shows lenders that the seller truly believes the new owner will be a good fit and it helps the buyer out by allowing them to not have to borrow as much from the lender.

Myth #3 - Confidentiality is not important, the more people that know my business is for sale, the better

This couldn't be further from the truth. I understand how someone could believe this as it makes sense in a traditional sales mentality. However when it comes to selling your business, maintaining confidentiality is important for the health of the company. You don't want to alarm employees and customers. People get nervous when they hear about a change in ownership.  Keeping the sale confidential will allow you to tell them when the time is right.

Myth #4 - I have to sell everything that goes along with my business including the real estate

This is not true either. In fact, many sellers do just the opposite. They sell the business but maintain ownership of the real estate as a means of collecting some residual income. The downside to doing this is that you then become a landlord and you are still somewhat connected to the business, so as a seller you need to decide what you want your role to be after you sell the company.

Myth #5 - A good to time to sell is when the business starts to slow down

The best time to sell your business is when it is doing well. While it may be hard to walk away during that time, you will benefit financially from being able to show prospective owners that the company has more room for growth. You also want to present your business to potential buyers at a time when it is most attractive, not when sales are slumping.

Peter Siegel, MBAAbout The Author: Peter Siegel, MBA is the Founder (of BizBen.com) & the Director Of the BizBen California Network (founded in 1994!) consisting of business buyers, owner/sellers, business brokers, agents, intermediaries, and advisors (there are over 90,000 users, and 8,000+ listings posted on BizBen.com). To join (FREE) the BizBen California Network, phone Peter Siegel direct at 925-785-3118 - get signed up for business for sale listings (Email Alerts) before they hit the market, view requests from serious business buyers - wanted notices, notices about upcoming FREE online webinars on the topic of buying and selling California small and mid-sized businesses and much more! Call Peter Siegel (BizBen Founder) today at 925-785-3118 for assistance.


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


Comments Regarding This Blog Post


The more brokers who have my listing, the better chance it has of being sold:

This pertains mostly to open listings. The problem is that if a seller lists their business with many brokers is that a) it becomes overexposed in the market, b) makes the business listing less confidential, c) makes it harder to sell, because all those brokers really aren't actively trying to sell the business, because they know all their efforts might not be rewarded, and their is a genuine distrust between the seller and broker, because they are afraid a deal might be made behind their back.


Myth #6 -- I can ask any price, even if totally unreasonable.

Well, you can; but your business won't sell. Your business broker can provide a fairly realistic price range based on sales of comparable businesses in the same or similar areas. This takes expertise beyond merely applying a "rule of thumb" and then multiplying or dividing. Your broker has experience dealing with numerous transactions of various kinds, is familiar with the current market, has access to sophisticated tools and databases, and understands the psyche of the business buyer. Depending on your strategic objective you can price your business high or low; but, keep it within the broker's recommended realistic range. If you price it incredibly high, buyers will question everything you tell them. If you rice it too low (for example, for a quick sale), they'll wonder: "What's wrong with this business?" Be smart--follow your broker's advice.


  Helpful Resources To Assist In Selling And Buying California Businesses
Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

Shalonda Chappel-Pilgram: Escrow Services - Southern CA

Escrow services to brokers & agents, owner/sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services.

Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
How Many Listings Is Too Many For One Broker To Handle? Is It 5? 10? 20?

Peter Siegel, MBA in this Vlog/Podcast discusses how many listings is too many for one business broker to handle at one time. Is it 5 is it 20? I recently had a coaching call with one of my BizBen broker clients who asked that question this week. There are many factors that go into the answer.

Absentee Run Businesses - A Myth Or Reality When Buying A Small CA Business?

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The Bottomline: What Exactly Is Adjusted Net Income, SDC, And Cash Flow?

The use of add backs & adjusted net income is common among sellers of businesses when showing their financial information/performance. But buyers are cautioned to review financials and tax returns / documents closely. Peter Siegel, MBA with BizBen (ProBuy & ProSell, Financing Expert) explains.

Financing A Business Purchase With Limited Or No Real Estate Collateral

In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment. Peter Siegel, MBA (Business Purchase Financing Expert) at 925-785-3118 shares his experience.

Thinking Of Selling My Business: What Factors Create Value And Drive Price?

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Uncover Hidden Problems In Due Diligence When You Buy A Small Business

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