A FEW COMMON QUESTIONS
Confidentiality is, perhaps, the most critical issue for a business broker. Virtually every business seller doesn’t want his employees, customers or vendors to know that his business is for sale. Zenexits is very cognizant of this fact and in every step that we take we emphasize confidentiality.
There is a great deal of variation in the time frame, but, if we had to pick an average time, eight to nine months may be close based on North America wide statistics. While this may sound like a long time, all of the facets of selling a company, including listing the business, finding buyers, interviewing buyers, writing contracts, due diligence and finally the closing process are all time consuming.
Transfer of the lease is crucial to the success of the transaction. It will be almost impossible to consummate a deal unless the lease can be transferred. Leases will have a clause that defines the landlord’s rights regarding transfer. Frequently the seller will be required to remain as a guarantor of the lease and often there may be a charge by the landlord for the transfer. Our network of highly-experienced commercial realtors work closely with you to ensure the transfer if lease is managed well.
This is a difficult one, it is very, very difficult to prove to a prospective buyer that you have earned income that has not been reported. The only suggestion here is if you are not reporting income stop right now and maintain accurate records including all income. There are some businesses that do sell in spite of this fact.
Typically, Zenexits has charges no upfront fees. We will analyze your company and go through the entire process with no cost to you. Your only obligation is when we find a buyer for your business. We traditionally receive our payment at closing.
The analysis of your business’ value or worth is another crucial function of the business intermediary. “The Market” makes the final determination of value. At Zenexits, we have tremendous experience in valuing almost any business. Our estimates of value are not “certified business valuations” although we can provide this service for a fee. However, our experience and volume of comparable businesses allows us to give the business owner a very good estimate of value. Our focus in determining the value includes finding true “owner benefit”. This maximizes the value of your business and ensures that the buyer has clear understanding of how much “SDE (Sellers Discretionary Earnings)”
This can be handled in many ways. Often the property is sold as a separate listing. However, the company owner will frequently retain the property, obtain a long term lease and earn an ongoing cash flow stream. Also, the property can aid a buyer’s ability to finance the business. We engage realtors from our network to get the best value for your property if you choose to sell it separately.
Most small businesses are sold with the seller retaining cash and accounts receivable. A working level of inventory is generally granted to the new owner.
Most often, the company is sold free of all debt. This means that the former owner will be responsible for accounts payable as well as all long term debt. However, we have had several larger M&A deals where the buyer assumed some of the debt.
The lack of good business records is the single most common reason for a business sales deal to fall apart. We can’t emphasize enough the importance of maintaining good books and records before selling. This includes accurate financial statements, cash register receipts or whatever records are necessary to prove income and expenses. Of course, current tax returns are a must. However, we do our best to work with the seller to sell businesses that may have less than adequate records.
We have a list of the ten most important things that you can do to improve your business before selling. Call Darshan at 778-682-0479 and we would be glad to email them to you.
Today, no later. Even if you think you are not ready to sell your company right now you can’t start preparing too early. Darshan will be more than happy to meet with you to help you to start thinking about your exit strategy.
Buying or selling a company can be a complicated venture. While some companies are sold without the help of accountants and attorneys, we strongly recommend that both the buyer and seller engage professionals. See my resources page.