Sell a Business

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Selling a Business Tutorial

 

Is it time to sell? Selling your business is a significant decision, as it represents the time, money, and effort you’ve invested in building and operating it. If you’ve decided it’s the right moment to sell, you’ll want expert guidance to ensure you get the best price and terms. This is where partnering with a professional business broker can make all the difference between simply selling your business and achieving a successful sale.

Below are some of the most common questions and topics asked by sellers. Please reach out to GBB. We are ready to assist with answering all of your questions.

For business sellers

If you’ve gone this far, then selling your business has aroused enough curiosity that you are taking the first step. You don’t have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer a lot of your questions and help you through the maze of the process itself.

The First Steps

 

Okay, let’s assume that you have decided to at least take the first few steps to actually selling your business. Before you even think about placing your business for sale, there are some things you should do first.The first thing you have to do is to gather information about the business.

Here’s a checklist of the items you should get together:

 

  • Three to Five years of Profit and Loss Statements and Balance Sheets
  • Three to Five years of Federal Income Tax Returns
  • The lease and lease-related documents
  • A list of the loans against the business (amounts and payment schedule)
  • Copies of any equipment leases
  • A copy of the franchise agreement, if applicable
  • An approximate amount of the inventory on hand, if applicable
  • The names of any outside advisors

Ensure your financial statements are accurate and up-to-date, focusing on cash flow, not just profit, as this determines value. Buyers look at income and expenses to see if the business supports a living.

Insider Tip:
The key question is how much you’ll keep after the sale. Your business structure and tax laws affect this. Seller financing can also impact taxes. Always consult a tax advisor before selling.

 

 

 

 

 

 

 

 

 

Who are the Buyers?

 

Buyers buy businesses for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. If the buyer is not serious, the sale will never close. Here are just a few of the reasons that buyers buy businesses:

 

  • Laid-off, fired, being transferred (or about to be any of these)
  • Early retirement (forced or not)
  • Job dissatisfaction
  • Desire for more control over their lives
  • Desire to do his or her own thing

A Buyer Profile

 

Most buyers looking to replace a lost job or escape an uncomfortable situation are typically male, though more women are entering entrepreneurship. Nearly 50% have under $100,000 to invest, often from savings or family. Many have no prior business experience and may buy a business they hadn’t considered.

Their main motivation is escaping their current job or unemployment, seeking independence. While financial factors matter, they are less of a priority. Buyers must be willing to take on the risks of purchasing and running a business.

Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses. Keep in mind the following traits of a willing buyer:

  • The desire to buy a business

  • The urgency to buy

  • The financial means

  • The freedom to decide

  • Ownership expectations

What Buyers Want

 
This may be a bit premature if you not have decided to sell, but it may help in your decision-making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked – and, should be prepared to answer:

Here’s a checklist of the items you should get together:
 

  • How much money is required to buy the business?
  • What is the annual increase in sales?
  • How much is the inventory?
  • What is the debt?
  • Will the seller train and stay on for awhile?
  • What makes the business different/special/unique?
  • What further defines the product or service? Bid work? Repeat business?
  • What can be done to grow the business?
  • What can the buyer do to add value?
  • What is the profit picture in bad times as well as good?

Buyers Want Cash Flow

Most buyers focus on cash flow, not just profit. Work with your accountant to organize financial statements, emphasizing cash flow. Buyers will review profit and loss, tax returns, compensation, and one-time expenses. Non-cash items like depreciation and interest are also considered when pricing your business.

Insider Tip:
If your business uses the internet, a well-developed website can be a major selling point, as many buyers recognize its value for growth.

What Can You Do?

 

  • Appearances Do Count
    Replace outdated equipment and refresh your business now, even if you’re not selling. Improvements like new signage, carpets, and paint boost sales, profits, and cash flow, preparing you for any future sale.
  • Everything Has Value
    Customer lists, proprietary products, secret recipes, well-maintained equipment, custom software, and good employees are valuable “off-balance sheet items” that enhance your business’s appeal, even if not part of pricing models.
  • Eliminate the Surprises
    Address all business issues—legal, accounting, or environmental—before selling. Eliminate surprises to ensure a smoother process and avoid unsettling potential buyers during the sale.

Insider Tip:
Create an operations manual, even if it’s simple. It adds value, impresses buyers, and helps sell your business faster. Include basics like ads, products, and menus, but exclude proprietary details.

Selling Recommendations:

Maintain normal operating hours; don’t let your business appear neglected.
Repair signs, replace lights, and maintain inventory.
Remove or fix non-operating equipment.
Tidy up the outside and spruce up the interior.
View your business from a buyer’s perspective to make it more attractive.

First impressions matter—well-maintained appearance and financial records are key. If you have questions, contact us! We look forward to helping you sell.