Selling Your Business and the Power of Competition – The Selling Criteria

More than ever before, the selling of your business has become extremely competitive. As a seller, in this market, you are competing with a greater volume of similar businesses for sale, buyers’ investment choices in this very tight and limited financing environment and, most importantly, the brokers’ time and involvement in your listing.

Here, I would like to focus on the latter-the brokers’ time and involvement in your listing. By the way, by “broker” I do not mean the person who got your listing, I really mean the thousands of other brokers in the market, whose purpose is to find a buyer for your listing and, as such generate a commission. They and your broker SELL YOUR BUSINESS. Now, they are human, folks. So, they look for listings that meet a “Selling Criteria”– In other words, the listings that have a greater probability to sell. Now, what do we mean by a Selling Criteria? Let me give you a few elements of it:

a. Commission. Many sellers like to pay less commission than standard on their listing. Guess what? Some brokers look at higher commission levels. Money speaks so they move to higher commission listings.

b. Financials. In our business, we can disclose a business’ profit and loss in more than one way. Although there are several ways in which we can disclose it, let me focus on three:

1. Owner to Prove. This means that an owner’s financial figures shown on the listing will be proven by the owner. Brokers and buyers normally spend little time with this kind of listing.

2. Profit and Loss Statements. This means that the numbers shown on the listing are backed by prepared financial statements-it could be QuickBooks, Accountants or CPA’s. Obviously, a preference would be audited financial statements, which seldom is provided.

3. Tax Returns. Buyers and Brokers both like Tax Returns. They are normally an understated indicator of the financial results of the company-as I mentioned in a previous blog, the understatement occurs through cheating.

c. Proper Documentation. Lease agreement, Franchise Agreement. This information provides the broker with greater insight on your ability to sell the business and help buyers make a quicker decision to buy your business.

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