Tips to Successfully Sell a Business in California

They are just as applicable if you are looking to buy a business. Selling a business or buying a business is rarely a simple process. When I sit down and try to categorize each of those experiences, whether from my own personal experience as a Business Broker in Sacramento or the experiences I’ve heard from the 14 Business Brokers who are part of my office, the different experiences tend to fit into one of the categories below.

The Seller measures success when selling the business by expecting to:

1. Receive all cash up front;
2. Provide one week of training.
3. Provide the Buyer with one day to do their due diligence.
4. Close the offer the day after the completion of due diligence;
5. Be paid five to six times the business earnings or discretionary earnings.

The Buyer measures success when buying the business by:

1. Buy a business with a 10% down payment.
2. Receive two months of training free of charge from the Seller;
3. Have four weeks to complete their due diligence.
4. Work in the business for 30 days to “test drive” it;
5. Pay no more than one year’s worth of business earnings or discretionary earnings.

About where the successful Seller and the successful Buyer meet:

1. The down payment from the Buyer is about equal to the business earnings or discretionary earnings.
2. The Seller provides some financing.
3. The Seller provides two to three weeks of training.
4. Buyer receives two weeks to complete their due diligence.
5. If everything goes smoothly, it typically takes 45 to 60 days to close the transaction.
6. The business is typically sold between one and three times earnings, with various factors influencing whether it’s sold for one, three times earnings, or something in between.

A Golden Rule that I stress to buyers and sellers is that the best way to get a deal done is to put yourself in the other party’s shoes. If you think about how the transaction impacts your side of the agreement, you will more than likely convince yourself that the other party is not offering enough. If this happens, you are not ready to buy or sell. For a transaction to occur, there must be a willing buyer and a willing Seller.

For more immediate assistance, you are welcome to send an email to Andrew Rogerson or call me toll-free at (844) 414-9700.

Further reading

The Perfect Business to Sell in California