When you’re listing your business for sale, you’ll work with your broker to come up with a competitive sale price. It should be a mostly scientific process that takes into account the financial health of the business and other comparable transactions.
If you’re fortunate, you’ll get more than one offer. However, the highest offer might not be your best deal. The terms of the business sale matter – a lot.
For example, you may have a qualified buyer obtaining SBA financing. It’s your highest offer, but the bank is requiring you to hold a 10% note. You’ll be second in line to the bank. To get all your money out of the deal, it’s going to take years.
Conversely, you may have another offer. The buyer is offering less but they are flush with cash and no financing is needed. At the time of closing, you’ll be fully funded.
Which is the better offer? Bianca Evans, an accomplished business broker with Transworld advisors, sits down with sellers and examines every detail. “My style is to treat every offer with respect. There are lots of factors to consider, including the motivations and age of the seller. We’re talking about everything so we can make the best decision possible. I go line by line so we can compare apples to apples. We go as slow as we need to so the seller clearly understands the deal points.”
Some of the other terms to consider are:
Lease assignment fee
Landlords typically charge a fee when adding a new owner. The cost can vary from just a few hundred to thousands of dollars. Who will be paying the lease reassignment fee? Don’t let this detail go unchecked. At the time of closing, the seller would have lost all of their leverage.
Franchise transfer fee
If the business is a franchise, the franchisor will not only have to approve the buyer, they will charge a franchise transfer fee. Who pays for that depends on the negotiated terms of the deal.
Franchisors generally charge a transfer fee of 25% to 50% of the initial franchise fee. That could be significant.
Accounts Payable and Accounts Receivable
A seller typically keeps the cash in the bank, as well as the accounts payable and accounts receivable. However, this isn’t always the case. On larger deals, or if the buyer is a company or Private Equity Group, a buyer will want to take on all the assets minus liabilities. It’s known as a “working capital requirement.”
Leased equipment
Sometimes a buyer will not want to assume your leased equipment. If they don’t, it will take precious cash to get out of those contracts or more likely they may attempt to negotiate that the lease is paid off at closing.
Work in progress
Depending on the business, sales cycles can be long. If you’ve been chasing a big deal for a long time and are close to closing, you may have the option to negotiate some financial benefit from the buyer for closing that sale. Calculating the cost associated with servicing this new customer can get tricky, so be well prepared for this conversation with the buyer. The goal is to have a fair and equitable transition of work In progress.
Evans advises clients to move quickly, but methodically. “Time kills all deals so when we have a buyer on the line, I want to move with purpose. Sitting on the offer for two weeks while you think it over shouldn’t happen. All of the “what if’s and “should I’s” would have been considered months ago. I’m looking to negotiate with all parties that submitted an offer. We’ll make an effort to improve those offers and choose the best one from those.”
The final sale price remains important, but failing to consider all the terms of the sale can turn a sweetheart deal into a dud.
About Bianca Evans
Bianca Evans is an experienced business broker based in Jacksonville, Florida. She is a top producer in her field. She has made over 170 transactions since 2006 which makes her among the most seasoned in the area. She is a Certified Business Intermediary (CBI), a Certified M&A Professional (CM & AP), a Board Certified Intermediary (BCI), and has her B.S. degree from the University of Florida.
Other notable accolades and achievements:
•The Million Dollar Plus Award 2008, through 2020
•Dealmaker Award top 3% in the state for completed deals 2018
-Most dollars sold in North Florida in 2018, 2019, 2020
•Sold an array of industries including manufacturing, wholesale/distribution, service, retail, restaurants, professional offices, and more.
•25 years of Sales Experience
She maintains her professional networks by participating in a variety of associations including the International Business Brokers Association (IBBA) and the Business Brokers of Florida (BBF).
One interesting fact about Bianca is that she used to be a business owner herself! She has been on both sides of the transaction when she purchased and later sold that same business. She finds that perspective invaluable when relating to her clients and balancing the many details and emotions.
She is licensed in Georgia and Florida and speaks fluent German.
To reach Bianca, email: [email protected] or visit her website https://www.myfloridabusinessbroker.com/