Q: How should I advertise my business for sale?
A: For a small local business I would simply start with posting a listing on an appropriate Internet site that features businesses for sale. For a larger business, I would place a listing on a trade industry website (if you are not using an investment bank). You might consider running the ad “blind,” that is, withholding the information about who has placed the ad, and including only a phone number or post office box number. You could use the trade industry website’s contact information for inquiries, which are then forwarded to you. In this way, your entire industry does not become aware of your intention to sell.
Q: What should the ad say?
A: With an ad for a local business for sale, one placed on a website alongside listings for many other businesses for sale, you need to come up with a catchy headline. The body copy should both entice potential buyers and also give them enough information so they get a strong feel for what the business does.
If you are not running a blind ad, you may try right away to qualify buyers. Your ad might say, “principals only” (so you don’t get dozens of phone calls from business brokers), or “cash buyers only,” or even simply “qualified” or “serious inquiries only.”
If you place an ad on an industry website your first consideration is whether you want to run a blind ad and, if so, whether you want to limit the information that identifies your firm. For an industry website you don’t need to run a “catchy” headline. Instead, keep the headline and the tone more matter-of-fact. This is more likely to attract an audience from companies already in the industry and serious potential buyers that are already established players.
Q: Are business brokers worth the commission?
A: Particularly if you are selling a larger business, you may find it easier to find a qualified buyer using the resources of a business broker. However, for a very small local retail or service business, you might do just as well selling the business yourself.
If you are hesitant to use a business broker, make every effort to sell the business on your own in a reasonable amount of time. If you aren’t successful within the set amount of time, consider giving your listing to a business broker.
Once you start advertising your business, you may find some business brokers willing to list your business on a nonexclusive basis. However, I suggest waiting until you can no longer afford either the time or effort required to sell the business yourself before you give over the listing to a business broker on an exclusive basis. Remember that a business broker will put much more effort into selling your concern if they have exclusive rights to your offering.
Finally, I caution you not to expect too much from a business broker or investment bank. Don’t get me wrong, I generally think you should at least consider using a broker. They can add a lot of value to the process, may increase the pool of potential buyers, and may increase the price of the sale. But generally, they are going to do less than you expect.
If you really want to have a terrific sales experience you need to view the broker or investment bank as your partner in the process. They don’t have as much invested as you and they don’t know the industry or the business as well as you. They are by nature salespeople. Sales people don’t tend to burn the midnight oil. For example, you may have to help increase the potential list of industry buyers, bulk up and improve the quality of the book, and help remind the broker to carefully follow up on every single possible purchaser, even if they don’t respond to the first phone call. But just because you end up doing some work that might technically be their responsibility doesn’t mean that they are not adding significant value to the process.
Q: If I provide seller financing, what interest rate should I charge?
A: If you must provide seller financing in order to complete the sale, you should charge an interest rate that is at least a couple of points higher than those currently being offered by commercial banks. You are almost certainly taking on considerably more risk than is involved in a typical bank loan. Also, you want to provide the buyer with incentive to find his or her own financing through a bank, relatives, or any other source that may be available.
Q: How long will it take to sell my business?
A: Assume it will take a lot longer than you think it will. While it varies greatly from one transaction to the next, the typical selling time for a very small retail or service business ranges from two to six months. For a larger business, a six- to twelve-month time frame is more common.
