Around the Web: A Week in Summary
A recent article from Exit Promise entitled “Top Seven Important Deal Terms When Selling a Business” highlights the main factors, other than price, that influence a seller’s decision when considering an offer on their business. While price matters, business owners care about their businesses and generally want the best for both themselves and their business, therefore they consider these factors in the sale as well as price:
- Speed of the sale
- An all cash offer vs. a financed one
- The compatibility of the potential new owner with their vision for their business
- % of the business the new owner wishes to purchase (most prefer to sell 100%)
- Whether or not there’s an earnout clause written into the deal
- The tax consequences associated with the deal
- Confidentiality of the sale
In the end, sale price is generally the primary focus of negotiations between a seller and a buyer. However, it is not uncommon for a buyer to choose to accept a lower offer, for example, if it’s a complete cash sale to a buyer whose business plan aligns well with the current owner’s dream for the company’s future.
A recent article from Exit Promise entitled “Business Broker Fees and Other Selling a Business Expenses” explains the typical fees and expenses that a business owner can expect to come across during the process of selling their business.
Business Broker Fees:
- Small Business: Typical fees include a 10% commission of final sale price and upfront $1000- $2500 to market, value and sell the business.
- Large business: Typical fees include 3-10% commission of the final sale price and upfront fees ranging from $2,500 to $25,000+.
These fees can vary from broker to broker depending on their expertise and services offered. They can also vary depending on the size of the business and specific services and time needed from your broker. It is always recommended to get multiple quotes from qualified brokers who specialize in your industry and the services you need.
- Small Businesses ( $1MM or less) : total legal fees are typically between $5,000 and $12,500
- Large Businesses ($1MM and up): total legal fees can range from $10,000 to $50,000+.
Your broker can recommend attorneys that are experts in business sales and negotiating with your buyer’s lawyer, protecting your interests and keeping legal fees from becoming excessive.
Other hidden fees can include severance payments to employees not retained by the buyer, prepayment penalties associated with paying off indebtedness of the seller, taxes, appraisals if necessary and a CPA.
A recent article from FinSMEs entitled “Raising funds to Buy a Business; What Are The Different Options?” explains the different ways to fund a business acquisition, how to approach each way and who it’s best for. The options explained include:
- Traditional lenders
- Borrowing from family and friends
Each of these options comes with its own obstacles and upsides, and some may be better options than others. Whichever option you choose to go with, be sure to do your research and prepare yourself for meeting the demands of each source of funding.