How quickly can I sell my business?
This is one of the questions that comes up in every meeting with every seller. It’s almost without exception in the first meeting. Once a business owner decides it’s time to sell their business, they typically want to initiate the process and complete the sale as soon as possible.
Unfortunately, numerous variables influence how quickly a business can sell in California. Here’s what’s happened in real transactions when looking at the question of “How quickly will my business sell?”
Selling a business is complicated.
Without exception, the process is more complicated than sellers expect. For a buyer to invest their time and take the process seriously, they want all the information up front. It should be disclosed as soon as possible.
I’m currently working on a transaction that started just three years ago. To get the business to market, the office manager employed by the sellers had to provide me with the necessary information.
The office manager was not motivated to see the sellers sell and, therefore, simply delayed providing the documents to me. Without the proper documents, there is no point in going to market, as the buyer will have questions. If those questions cannot be answered, then the transaction will simply come to a grinding halt, frustrating all parties.
Sell a business in California from a position of strength. This means being totally organized and anticipating as many buyer questions as possible. You can’t anticipate all questions, but with a solid foundation of knowledge, it’s easy to answer unexpected questions quickly and efficiently, keeping the buyer engaged.
In another transaction, the buyer and seller exchanged Letters of Intent. The Letter of Intent was used because it was not binding, allowing both parties to outline the main points of the deal. In this particular transaction, 22 Letters of Intent were issued over a period of several months. Yes, the deal did close, but it took patience and perseverance.
What are you selling and why does that matter?
What are you selling? This may seem a silly question, but it is fundamental to the successful sale of a business. Why does it matter? The majority of a healthy business being sold is goodwill.
Yes, it includes some tangible assets, such as fixtures, furniture, and equipment, and it may involve a business with physical inventory. However, the sale of a business also includes phone numbers, possibly a lease, employees, processes and procedures, legal agreements, and more, which don’t have any physical value but do have intangible value.
How is that value measured? The value is measured from the cash flow of the business.
Click this link to see a sample business valuation or medical practice valuation.
The cash flow of the business is reflected in the financial statements. This includes profit and loss statements, balance sheets and most importantly, tax returns.
If the business cannot produce a set of quality financial statements, then the cash flow cannot be shown. Consequently, no lender will lend against the business, and a buyer will be unwilling to close the sale.
Quality financial statements matter
Recently, I tried to sell a medical practice, and its sales exploded. In fact, the practice grew so fast that the owners didn’t have time to hire the proper Chief Financial Officer. Thus, they made mistakes with the quality of their financial statements.
When they finally understood the documents they were producing were inaccurate, it was too late. The payroll tax being paid to the IRS was incorrect, which meant the owners were incurring unnecessary fines and penalties. In fact, it put the success of their practice in jeopardy.
What was even worse was that there were 2 buyers ready to make offers. However, the sale had to be put on hold while the financial statements were corrected.
Do you really want to sell?
It has been my privilege to work with some excellent doctors to sell their practices. They would like to retire.
Being a doctor is a lifelong vocation that requires continuous learning. It involves adapting to new medical and computer technologies, as well as responding to constant changes in government laws and regulations, among other challenges.
If you can qualify as a doctor and wish to run a practice, then it is not for the faint of heart. Deciding to sell presents its own challenges as it requires letting go of what you’ve done, including the personal interactions you’ve had with your patients over the years.
One of the first questions a seller needs to know is what they will do once they have sold their property. This is a fundamental question. If not addressed, it will result in a final decision to sell to a buyer, even after months of work and negotiations.
Are you considering selling your business and taking on your next challenge? Would you like to know the value of your business information? Please visit my website, Business Valuation.
For more immediate assistance, you are welcome to contact Andrew Rogerson or call me Toll-Free (844) 414-9700 or email me at support@rogersonbusinessservices.com.