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Questions & Information
Selling your business or buying a business may be one of the most important events of your lifetime. The success or failure of this transaction will be directly related to the skill used in finding the right company or in determining your company's value, finding the best buyer, and arranging a timely closing.
Delaware Valley Business Network educates our entrepreneurs and owners on the entire process and we maintain that the most successful transactions occur when all parties are aware of the transfer process and each party’s responsibilities. As the Delaware Valley affiliate for the nationwide BBN network of business brokers, we provide the most professional middle market business services available to our clients, experience typically available only to large companies.
As a service to our current and future clients, we provide the following information and answers to some frequently asked questions:
General Questions
Seller Questions
Buyer Questions
Please Contact us if you have other questions about buying or selling a business.
General Questions
Why Is DVBN More Successful Than Our Competition?
No up-front fee options – Our competitive fees are typically based on successfully completed transactions.
Confidentiality – We know this is most important to business owners and to us – we protect your business with respect to customers, employees, suppliers, and lenders.
Value Achieved – With a sophisticated valuation process, and the use of independent valuation services, we maximize our client’s company's value, and help clients to set realistic goals and then work hard to exceed them. Our asking prices are well defined and defensible. This level of professionalism reduces the time wasted responding to buyers making low-ball offers.
Size – Our 450 national offices provide the widest geographic service to our clients – with the most potential buyers and sellers. We are the only truly national brokerage firm.
Middle Market Specialists – our network of brokers and advisors have clearly defined objectives and criteria. We are not:
- A local stand-alone broker who struggles to close 20% of their listings,
- Simply a business brokerage arm attached to a real estate office,
- Nor are we a franchise with listing quotas and monthly reporting requirements on listing volume that divert our attention and require us to walk the strip malls looking for small businesses to sign-up to meet a quota.
Research – we conduct in-depth research and perform rigorous analysis and carefully designed marketing materials support every client's objectives.
Internet Technology – we use the most advanced internet technology to provide our clients with a competitive advantage in market information.
What Are The Major Steps Involved In A Business Transfer*?
- Business owner decides to sell business.
- Gather information to understand the business. Perform a situational analysis and understand the strategic business plan, strengths, and opportunities. Identify industry and economic outlook. Review business comparables.
- Perform a business valuation to determine its fair market value.
- Organize a marketing package that includes at a minimum:
- Year-to-date financials
- 3 years of most recent financials and tax returns
- Asset and equipment list
- Copy of lease
- Summary of company information
- Identify potential buyers:
- Existing pre-qualified buyers
- Vertical and horizontal integration strategic buyers
- Management buyout
- Local, regional, national and international candidates
- Financial statements are obtained & buyer profile is completed
- Pre-qualify buyers based on financial ability, sincerity and fit
- Arrange meetings with buyer and seller.
- After meeting, buyer writes a formal offer to purchase or letter of intent with an earnest deposit.
- Price and terms of the business are negotiated by the buyer and seller until an offer is accepted by both parties.
- Buyer performs due diligence on business (approximately 7-21 days).
- The offer to purchase is submitted to an escrow company and background searches are conducted on business (approximately 5-10 days).
- Buyer and seller meet at the escrow company to complete the business transfer.
EXIT – A Business Owners Guide to Selling A Company, by Alexander Vantarakis and William Whitehurst. Both authors are BBN Affiliate brokers.
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Seller Questions
Why Leverage An Intermediary To Sell A Business?
Owners and entrepreneurs have found that the use of a financial intermediary in the process of selling or buying a business provides a number of important advantages:
Confidentiality – An intermediary can preserve the confidentiality of the selling company during initial contacts with prospective buyers, thus restricting knowledge of the identity of the seller on a "need to know" basis. The intermediary is also able to screen out unqualified buyers.
Advisory Role – An intermediary can provide the owner of the business with advice on the timing of initiating the sale or acquisition effort, the value of the business being sold or acquired, the appropriate asking or offer price and the structuring of the transaction terms that would be most advantageous to the owner.
Knowledge of Potential Buyers – A Merger and Acquisition Advisory Company, in the course of its normal activities, becomes aware of and tracks the acquisition criteria of potential buyers and sellers.
Facilitator Role – An intermediary keeps the merger and/or acquisition process moving forward with prospective buyers and sellers. The intermediary is in a better position to do this than the owner of the business because an owner who appears over-eager will find himself negotiating from a position of weakness. The broker also spares the owner considerable time involvement in the sale or acquisition process, allowing the owner to devote more of his energies to running the business.
Negotiation Assistance – By serving as "point man" during the negotiation process, the intermediary can establish a strong bargaining position on behalf of the seller without compromising the goodwill between the principal parties. Use of an experienced and capable intermediary will help assure that the seller receives the best price for his company.
Why Use a BBN Affiliate Broker As Your Intermediary?
The process of buying or selling a business requires dedication and the attention of a professional with the knowledge of the complete flow of a business transaction, as well as a team in place to accomplish every aspect of the transfer. Marketing and facilitating a business transfer is a full-time job! You deserve someone who will work as hard as you do. A qualified broker will save business owners and prospective buyers money by helping them avoid costly mistakes, effectively marketing the appeal of the business, and maximizing exposure to serious, qualified buyers--all with complete confidentiality.
If you are interested in selling your business and don’t know the answers to the questions below, you will benefit from the assistance of a Delaware Valley Business Network broker, your BBN Affiliate in the Delaware Valley.
- How do you reach qualified buyers, including possibly competitors, without disclosing your intentions to sell?
- How do you evaluate your business objectively to ensure you receive top dollar for your investment and avoid costly negotiating tactics?
- How do you prepare and provide the information a prospective buyer will require and convince him to pursue your business in favor of other options?
- How do you arrive at the best price and terms, including the intangible and goodwill values of your business?
- How do you maximize your favorable exposure to potential offers while minimizing your potentially damaging public exposure to customers, competitors, employees, and suppliers?
- How do you market your business in all of the appropriate markets, databases, and media efficiently, effectively and confidentially?
- How do you screen and pre-qualify buyers, determine their motivations, managerial capabilities, and financial strength?
- How do you effectively sell your business, diverting significant time, effort and resources to that process, while continuing to manage your ongoing business productively?
Delaware Valley Business Network has the expertise, tools, and professional team to market and sell your business successfully on a national basis. Our objective is to protect your business investment and maximize your net after tax profit on the sale. It is in your and your intermediary’s mutual best interest to obtain the best possible price that a reasonable buyer will pay. We strive to maintain high ethical standards and communicate in an open and honest manner in all of business relationships.
Large Network – Via our BBN affiliation, we offer business owners the opportunity to have the largest business brokerage network in the world working to sell your business, not just one local broker. Common sense says it is better to have the potential of 450 affiliate brokers nationwide seeking the right buyer for your business instead of one local individual.
Multiple Offices – Finding one prospective buyer is insufficient. Creating competition among multiple buyers should be a broker’s goal. A buyer without competition feels free to offer less than the full value of a business. When a buyer knows several other buyers are looking at the same business, they are hesitant to offer less than the valuation price and terms being solicited.
As the only true national firm in the industry, BBN has offices covering every state in the nation. No other brokerage firm comes close to being able to make this claim. Before BBN was established, an individual living on the West Coast who wanted to relocate to the Southeast would find no value working with a broker locally because the broker would not know what was available outside the local market. As a result, a prospective buyer would need to go from broker to broker in the desired new location. This only caused frustration and a waste of time, and seldom, if ever, resulted in completion of a business sale. Now, prospective buyers can contact a local BBN Affiliate Broker, and the prospective buyer will have access to listed businesses from Affiliated offices in the desired area with brokers comfortable and excited about all co-brokering opportunities.
Professional Marketing – Another factor to consider is packaging. Poor packaging of business is one of the major complaints expressed by buyers. We have been told by hundreds of buyers that BBN affiliates have the best and most professional packaging in the industry, ensuring that sellers are effectively motivating the acquisition of their business. DVBN and all BBN Affiliate Brokers have standardized and detailed packaging, which, in addition to its appeal to prospective buyers, makes it easy for one Affiliate Broker to quickly understand a business listed by another. When a prospective Buyer is presented the information on your business, the Buyer will be able to have most of his questions answered and be able to make an informed buying decision.
Confidentiality – is vitally important when working with any broker during the selling process. Delaware Valley Business Network and all BBN Affiliate Brokers protect information about the business for sale from being presented to unqualified buyers. In addition, we require potential buyers to provide proof of financial ability to acquire your business. So, the Seller can make an informed selling decision, all within the confines and security of confidentiality.
What Affects The Selling Price?
Terms – Several factors come into play and can affect the sales price. One of the most critical is the 'terms' or the amount of down payment and the amount financed. Over eighty (80%) percent of all middle market businesses sold above $100,000 are sold with one-third or less down and the owner financing the balance. Asking for one-half down will reduce the price by approximately twenty percent. Asking for all cash will reduce the price to about forty to sixty percent of the amount attainable with one-third down.
Down payment or the 'terms' is a key factor, because a buyer is trying to buy as much business as possible for the money available for down payment. So, when a seller asks for $200,000 down on a $400,000 value business, buyers prefer to continue looking until a $600,000 value business is found where the owner will accept $200,000 down and finance the balance. The seller who asks for all cash or a large down payment is not going to succeed in obtaining the full fair market value of their business, because buyers know they can buy three times as much business for the same investment. In a nutshell, high percentage down payments cause buyers to discount offers.
Presentation – A second critical factor is the quality of the information provided to a prospective buyer. The value of the assets and cash flow generated by the business must be provable and verifiable. A professional business broker will be able to assist the business owner in arriving at these values.
Multiple Offers – The third most important factor that affects the sales price of a business is whether there is competition among prospective buyers for the business. Competition creates higher selling prices, as we all know from basic economic principles. When a business owner asks for more than the fair market value for their business or does not offer reasonable terms, there will be few, if any, buyers interested in acquiring the business. On the other hand, when a business is priced realistically and with proper terms, multiple buyers are likely to pursue acquiring the business. A buyer who knows he has other buyers competing for the business will be motivated to offer the price being asked to ensure he does not lose the business to another buyer's better offer.
How Will My Business Be Advertised?
BBN Affiliate Brokers use several media to solicit prospective buyers. In addition to using the top business listing sites on the Internet, we use national newspapers, including the Wall Street Journal, and trade publications. Qualified buyers are also identified from other affiliate offices comprising more than 1,000 individuals, corporate acquirers and investment groups. Local newspaper advertising is used less frequently because it is often more difficult to protect confidentiality when a business is advertised locally. The specific advertising plan for each business depends upon the size and type of business.
What Do I Need To Do To Help Sell My Business?
The first thing you need to do is offer the business at a fair market price and with reasonable terms. You will need to provide as much information as is possible to your broker intermediary so a professional marketing package, including a business profile, can be prepared on your company.
The quality of the business profile will greatly enhance the 'salability' of a business. A package prepared by a BBN Affiliate Broker will contain the financial, operational and historical information about the business. Informed buyers make better offers.
Other things a business owner interested in selling can do are:
- Continue to run your business in a normal manner
- Keep the business clean and organized (on paper and in person), so potential buyers will like what they see
- Liquidate or set aside obsolete inventory and unneeded equipment before you place the business on the market
- Notify your broker of any material changes in your business
- Forward monthly financial statements to the broker as soon as they are completed. This will keep your marketing package current
- Do not meet with potential buyers without your broker present
- Avoid direct negotiations
- All offers and counter-offers should be in writing and presented only by the broker.
Can You Sell My Business for Me?
A broker cannot really sell a business for an absentee-owner, because he or she does not have the intimate understanding of the business and its operations, and certainly not the level of knowledge the owner has. Therefore, a professional broker's initial job is to get a business listed at the best possible obtainable price and with realistic terms of sale. The broker’s next job is market the business and to screen and qualify buyers to keep the seller from wasting time with people who are not financially feasible.
Qualified buyers will be presented your business profile after they have completed a Buyer Warranty and Confidentiality Agreement that protects the confidentiality of the seller regarding the potential transfer. The broker will then schedule a meeting between the business owner and the interested and qualified buyer(s). During this meeting, the business owner will explain the business to the buyer. After this meeting, the broker will work to get a written offer to purchase. The broker will present all offers and after acceptance will coordinate the due diligence process that will lead to the closing.
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Buyer Questions
What Are The BUYER Benefits of Working With DVBN?
Prior to the establishment of Business Brokers Network (BBN), attempts to acquire a business in another city and/or state resulted in loss of time and money as the prospective buyer contacted various local brokers for available listings. These challenges are unnecessary today because of BBN's national program, professionalism, organizational structure and size.
The potential Buyer is now able to critique businesses offered nationwide with a conveniently located and highly skilled Delaware Valley Business Broker who can provide any and all information needed to make an informed buying decision.
The number of business opportunities available for potential buyers is also significantly larger than with other brokers. Delaware Valley Business Network and BBN promote extensive co-brokering at no additional cost to Buyers or Sellers. Therefore, Buyers can review business listings from Delaware Valley Business Network and from all other 450 BBN brokers around the country.
In addition with our acclaimed business transfer process, Buyer confidentiality is protected until a site visit is made. More specifically, no financial information is given to the business owner until the Buyer submits an “Offer to Purchase” or a “Letter of Intent”.
What Is The Typical DVBN Buyer Profile?
The Buyers that Delaware Valley Business Network brokers work with most often fall into two categories:
- General Business Brokerage – Over seventy percent of the Buyers we work with are first time Buyers. Most are leaving “Corporate America” with a strong desire to own a business in order to control their own destiny and earnings. We take the time to educate this type of buyer as to what can realistically be accomplished based on the size of investment.
- Mergers & Acquisitions – Investment groups and corporations seeking to grow through the acquisition of other companies have found that one telephone call, fax, or e-mail can provide numerous opportunities all over America.
How Would A Buyer On-Site Visit To A Seller’s Business Be Conducted?
The philosophy at Delaware Valley Business Network is a simple one: we only work with serious, qualified buyers and sellers. All businesses listed for sale with our firm are presented at a price that is reasonable and fair to both buyer and seller. Generally, financing of some kind is also available to qualified buyers. All businesses have a professionally prepared business profile, verifiable financial statements, and an equipment list. Similarly, all buyers are required to provide financial statements and confidentiality agreements prior to receiving any non-blinded, company-specific information.
At DVBN, we cannot afford to march in buyer after buyer for on-site interviews with a seller. This destroys our credibility with our clients. In order to ensure a quality meeting between buyer and seller, we ask that all buyers follow a few simple reasonable guidelines as a courtesy to the seller:
- Please be considerate of the seller. If you know, as a buyer, that you are not planning on making on offer, or if you are planning on visiting other businesses before you make a decision, we ask that you not visit any of our opportunities. The seller and the broker have both spent considerable amounts of time preparing the business for sale and making time to visit with prospective buyers. "Tire kickers" have a tendency to give false feedback and will ultimately hurt the chances that a business will sell.
- Be prepared. Make sure that you have considered the obvious. Is this an industry that you are comfortable with? Is the business located within a reasonable distance from your home? Can you see yourself running this business? Is the cash flow sufficient to meet your needs? Is the business within your price range? These are obvious questions that can be answered from the marketing package and if any of these issues cause a problem, then again, we ask you not to request that we schedule a visit with the seller until these issues have been resolved.
- Decide in fair time, with specific rationale. Within a few days of the visit, if you, as a buyer, are not planning on extending an offer, we ask that that you follow up with your broker from Delaware Valley Business Network and inform us of any reasons why you have chosen to pass on that particular opportunity. Again, we ask this as a professional courtesy to the seller; if there are recurring reasons why the market place is viewing an opportunity in a negative manner, the broker and seller need this feedback and information in order to address the issue. At this point, after taking time out of his day, and opening up his financial records, a seller has a right to a legitimate reason as to why a buyer has passed.
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24 N. Bryn Mawr Ave * Suite 272 * Bryn Mawr, PA 19010
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