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Best Time to Sell a Business
Every owner wants to sell when the time is right. In selling a small business, the right time depends more on the owner and the business than on external events. Unlike stocks, bonds and real estate—which rise and fall with interest rates and other factors—the market for small businesses tends to remain stable.
Since a business exists primarily to benefit its owner, the best time to sell is when it is best for the owner. Owners tend to sell when their lives change significantly—through retirement, burn-out, illness, divorce, financial difficulties, or other events. These events influence when the owner should sell his business.
The final sale price is determined by the Buyer and Seller in the free market. In deciding how much he is willing to pay for the business, the Buyer looks primarily at its cash flow, which is the return on his investment. A Buyer will often pay more if the Seller provides financing, because it enables the Buyer to further leverage his investment to buy a larger business producing more cash flow and an even better return on investment.
The owner should try to sell when business is good. Profitable growing businesses are much easier to sell than unprofitable declining ones. Ironically, many Sellers hold on too long while the business is making good money, then try to sell as it struggles. No matter how much the Seller stresses the successful past and bright future of the business, most buyers are only willing to pay for its present performance. Buyers also like industries enjoying favorable socio-economic trends, fads or publicity. Sellers should be wary of riding a favorable trend for too long, because whatever goes up usually comes back down.
There is always a market for small businesses. Business owners are constantly faced with life events that drive them to sell their businesses. Prospective buyers are also constantly entering the market, driven by own their circumstances--acquisition strategies, corporate downsizing, career change, entrepreneurial spirit, return to the workforce, or the desire for more career control or creativity. Supply and demand tend to remain fairly balanced in this market. When the economy is booming, businesses may be more profitable and attractive, but individuals also have many other employment and investment alternatives. When businesses struggle, more owners may want to sell, but their businesses are less attractive to buyers.
Ideally, an owner should have a succession plan and be ready to sell at any time. It can take several years to years to implement the succession plan. The business sale process itself averages about 8 months for smaller businesses and over a year for larger businesses. Seasonality should also be considered in the plan. A Hallmark Shop, for example, would be worth more just before the holidays, while a tanning salon will fetch a higher price just before the Summer. Planning is the key to getting the best price for the business and results for the Seller.
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CLIENT TESTIMONIALS “I was happy with my experience with [BestSoCal]. Very professional and willing to help when the time came. Very responsive and hands on, not like my other experiences with agents and brokers. Very appreciated.” Todd Uyesugi, Seller “[BestSoCal] has handled the sale in the most professional and complete manner possible. I am very pleased with the experience.” Matt Ouwerkerk, Buyer “(The landlord) was difficult, but with Alan’s patience it all worked out for the best! Lino did an excellent job with customer service, always polite! Thanks!!” Rich & Trish Lindsay, Sellers “Alan was very helpful. Always returned our phone calls (not everyone does). He made us feel at ease, and found us the perfect business! We were looking for about a year. He made this a great experience. A million thank yous!” Debbie Rosetti-Colacion, Buyer “I am writing this note to express my extreme satisfaction with the way the sale of my restaurant was handled by Elizabeth Rebufat of [BestSoCal]. It was an amazing accomplishment considering the time of year and the type of business it is. Being the middle of November, I didn’t expect it to be listed and sold within 3 weeks, truly a tribute to the diligence of the agent and the great marketing skills of the brokerage. Excellent negotiating skills kept this in escrow, and kept the buyers motivated to purchase this business. It made the whole transaction less stressful for me. I am so glad I listed with Elizabeth, as I have found a new friend, and would absolutely do business with her and her broker again.” Jason Reavis, Seller “You guys made everything very simple, and I never once felt that Elizabeth was biased toward the seller. I like how you did comparisons for us. You went out of your way to find industry information for us. Surprisingly, I bought a business I never would’ve considered because Elizabeth was able to assess our needs.” Omar Toma, Buyer “Absolutely superb! Highest recommendations! Extremely professional!” Marty Johnson, Seller “Elizabeth kept in contact throughout the entire process and always answered any questions I had. She made me feel very comfortable during the whole experience. Great service!” James Taylor, Buyer “Everyone, from Lino to Sylvia to Alan was very helpful and professional!” Jeff Linder, Seller “Good, professional, efficient service.” Jeff Bower, Buyer “I want to thank [BestSoCal] for your professional services provided in selling my business. Special thanks to Randy Neyland and Jaime Gomez. You guys are special. I couldn’t do it without you. Again, I commend your services and thank you very much.” Sal Garcia, Seller “…[BestSoCal] have been helpful and professional. We are satisfied with their performance. We would also like to continue to do business with them in the future. Randy Neyland was nice and great. We are happy and are ready to open. Keep up the good work.” Omar Romero & Enrique Velazquez, Buyers “Excellent Rep. Always returns call very promptly. Never left me waiting. Always seems to keep client’s best interest first. A true pleasure to work with.” Jerry Thibodeau, Seller “Outstanding customer service. Easy, smooth transaction. Clear explanations; good understanding. Excellent marketing presentation.” Joseph Zeeb, Buyer “Incredible service from Alan. This was a tough sell and I’ll be grateful to [BestSoCal] forever!” Tran Tracy, Seller “Customer service from Alan Lippincott went above and beyond the call of duty. Alan was consistently supportive; professionally business focused during a very difficult settlement; and with a cheerful spirit. I highly recommend Alan as a business broker and would definitely use his services again.” Carol Hartman, Buyer “Outstanding organization, great teamwork. This was money well spent, and I frankly couldn’t have asked for anyone better than Elizabeth, and there was nothing I would have changed about the way she handled everything – exceptional!” Stefano Riznyk, Seller “I was satisfied with doing business with Lucky Team Escrow, and would recommend [BestSoCal] to anyone.” Henry Coronado, Seller “We appreciate everything you have done for us. We are really happy about it! Jaime, Alan, and Randy, we appreciate all of you. We appreciate…Carol at Lucky Team Escrow who helped us a lot. Thank you all!” Juan Ambriz & Laura Padilla, Buyers “Our experience working with you has been extremely good. You made the whole transaction completely painless. You guys showed a very high level of professionalism and were very patient when things did not go completely according to plan. You actually helped us bring everything back on track to close the transaction in a timely manner.” Jatinder Singh, Buyer “Elizabeth is a “breath of fresh air,” and it made my job so easy!” Carol Jones, Certified Senior Escrow Officer “[BestSoCal] did an exceptional, professional performance of all duties as commercial real estate representatives. I would highly recommend their service to colleagues without hesitation.” Olva Jang, Seller “This transaction went quite smoothly. Alan stayed on top of the process and made sure everything went as planned.” Raili Classen, Seller “It was a great experience! Thank you Alan for helping us with this. I’m very happy and we are thankful for all your hard work. You ROCK!” Karen Abdul, Buyer “ [BestSoCal], made the whole process of selling my business as easy as possible. I feel confident that all the legal steps have been taken and I can sit back and enjoy retirement. I would recommend this service to my friends.” Mick Ofield, Seller “Thank you for all your efforts! As a point of memorialization, without your help, I would have overpaid the purchase price by approximately $1,000,000!! You have been very professional with much patience! Thank you! ” Steve Berggren, Seller “I was very happy with Alan’s work, and when we met him he was on top calling, informing us in everything. All I can say is that we were happy with his service.” Raul Rizo, Buyer “Excellent service. Prompt response on each and every issue.” Alex Friedland, Seller “I would recommend Joleen to anyone who lists with [BestSoCal].” Alice Billman, Seller “Joleen made it happen! Kind & considerate, helpful! Alan gets things handled! Thanks very much!” Debbie Drew, Buyer “Alan was wonderful to work with, he made the process very easy for us. We would definitely work with your company and Alan again. Thank you for a well handled, smooth experience! Spienello Deli Inc., Seller “The service from Alan was the best!” Santiago Escobar & Jose Vidal Escobar, Buyers “Thank you for everything. I really appreciate your great endeavor to help me.” Tristan Parque, Seller “It took longer than expected, but Elizabeth was very patient and made everything finish smoothly…” Young Choi, Buyer “Alan showed the upmost in professionalism while carrying my sale from marketing to close. I would not only recommend him, but I would use him again.” Xtreme Autosports, LLC, Seller “Alan was very helpful with every step of the purchasing process. He was always available and answered all questions and concerns promptly.” John Solitare, Buyer |
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