How to Sell Your Small Business: Tips For Selling Your California Business


How to Sell Your California Business

The idea of selling your business can be stressful and emotional. As a business owner and specialty consultant myself, I can sympathize with someone who is selling their business because I know how much time and effort goes into owning a small business. Business owners choose to sell their business for many reasons, maybe they want to retire, maybe the business isn't producing the profits they need in order to live off of it, or maybe it's just time to move on. Whatever the reason, here are a few tips on how to sell your small to mid-sized California business.

Before you list your business for sale and officially put it on the market there are several things you should do to prepare for potential buyers. In my experience, I've seen businesses receive inquiries the day they are put on the market (email and text alerts are very popular and effective with business buyers) so make sure you've done the necessary prep work before your phone or email lights up with potential buyers seeking information about your business you have listed for sale.

Get It Clean And Repair Items

Cleanliness is so important. Depending on the business, cleanliness is somewhat subjective. If you are selling your car repair business, it won't need to be nearly as clean as someone looking to sell their restaurant or salon, but regardless of the industry, make sure the facility is as clean as possible. Hire a professional to come in and give it a thorough cleaning if you don't have time.  The cost will pay for itself in the long run.

As you are doing a thorough cleaning keep an eye out for repairs that can be made to improve the overall appearance of the business. You want to identify small items that can have a big impact like painting, changing hardware, light fixtures, minor redecorating, things that are relatively inexpensive that can have a large impact. Look at the first place your potential buyer will see as they enter your facility and make sure it's top notch. You only get one chance to make a first impression.

Your Staff And Your Exit Strategy

If you haven't already, now is the time to think about your exit strategy specifically as it pertains to your staff.  Consider whether or not you want to tell your staff about your plans to sell your business. They may see potential buyers coming in and out, and you may need their help in keeping the facility as clean as possible throughout the sales process so telling them upfront may be beneficial to you.

Additionally when it comes to your staff, be sure that someone can do your job. When potential buyers are looking at your business, it will be more attractive if another staff member can step in once you've left.  In my experience, having a solid exit strategy is just as important as finding the right buyer as you want to leave your business in a healthy position. If a buyer sees the company will remain stable in your absence, it will be all the more attractive to them and easier to make an offer.

Paperwork And Documents Needed

Take some time to gather all the proper paperwork. Potential buyers of small businesses are not only going to want to look at your facility but all your important business documents and information such as:

- Your business tax returns for the last three to five years
- Your P&L's & interim financials
- Your balance sheets for the last three to five years
- Bank statements & possible register receipts
- Current lease information (make sure to check and see what is transferable and what is not)
- Insurance information as well as your licenses and permits
- A list of furniture and equipment that is being sold with the business
- Any vendor agreements, contracts
- Employment contracts with key employees and/or managers

Consider A Business Broker Or Agent

Once you have done all this, my recommendation would be to consider working with a business broker or agent. A business broker or specialty agent can do a number of things for you and can help make this process less stressful as they have done it all before. Not only can a broker help you find a buyer but they may also be able to assist you with your exit strategy.  BizBen.com lists most of California's business brokers and agents, so for starters, I suggest you visit the site and take a look around in the Resource & Broker Directories. Ask your professional contacts for referrals and contact local resources like the Chamber of Commerce, business development organizations and other agencies geared toward the business community can also be resources for you. This is an important part of how to sell your business, because if you select the wrong broker or agent, your business may sit on the market for months or not sell at all!

Pricing - Valuing Your Business Correctly

With your broker or agents help, establish your asking price for the business. When selling your small business remember that there are usually two prices, one is the asking price which is what you, the seller, would like to get for the business. The second is the selling price which is what the seller receives. Somewhere in between is the Fair Market Value, which is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.

There is no formula for figuring this out. Each business needs to be considered on an individual basis. There are, however, certain benchmarks and valuation approaches and methods that enable an experienced appraiser to determine the most probable price for the business (BizBen has thousands of pre and post sale comps of California businesses currently selling & that have been sold). Having your business priced appropriately will make it more attractive to potential buyers and increase your odds of selling.

Be Patient | Have Your Advisory Team Ready | Take Back-Up Offers

In my experience, I've found that it can take from start to finish two to twelve months for a California small business to sell. The period of time really depends on the team you have in place to assist you.

Make sure you have a professional broker or agent, a transactional attorney, a escrow/bulk sale service, and several business purchase financing options for your potential buyers. Once your business is on the market you have to be patient and wait for the right buyer to come along.

If you do have broker or agent representation make sure you have weekly dialogs to see how the process is going - how many buyer inquiries have there been, what has the response to the current advertising and marketing campaigns, do any potential buyers want to visit the business and meet you? Remember to take back-up offers even if you have a LOI or purchase agreement in hand. Over fifty percent of all California small businesses for sale in contract fall out!

If a buyer starts taking too much time - go to your back-up buyers and let them have a shot!

Categories: BizBen Blog Contributor, How To Sell A Business, Selling A Business

Contributor:

Peter Siegel, MBA
Areas Served: All Of California
Phone:  925-785-3118 Cell, 925-785-3118 Text
Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.

Comments Regarding This Blog Post


In addition to all these good points, a seller should go through a comprehensive "disclosure list" with their business broker. These are items that a prudent buyer is going to want to know eventually anyway, and it pays for the seller to get out ahead, and correct anything that could be a problem. I use a 3-page checklist of over 60 items--about regulations, litigation, safety and environmental issues, latent financial obligations, employees, insurance claims, etc., etc. We analyze potential problems and pro-actively take care of them long before we get to the due diligence stage. It can be the difference between a business selling or not selling.


These are all great points, Peter. Another thing a broker and seller should agree early on in regards to price is if the seller wants all-cash or is willing to carry a note. All cash is preferred by many sellers, but in an environment where availability to cash and loans are getting more difficult to access, it can mean a lower price for the seller, but less headache after the business is sold. A seller who is willing to carry a note, can cast a wider net in regards to potential buyers, but of course that note needs to be serviced after the business has sold.






  Helpful Resources To Assist In Selling And Buying California Businesses
William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Elizabeth McGovern: Escrow Services - San Francisco 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.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

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.

Helen Yoo, New Century Escrow - Escrow Services In 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.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, 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. 951-808-3972.

Brad Steinberg, Business Broker: Laundromat Specialist

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.


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