As you prepare to put your house on the market, you get the word out to as many people as possible. The “For Sale” sign is placed in the front yard, you invite people into your home during an open house and you put ads in the newspaper and online. You want everyone to know your house is for sale.

However, that’s not the case when selling a business. Place an ad that your business is on the market and people start to wonder. It creates an air of uncertainty that can be detrimental to your bottom line and put the company in jeopardy.

To increase the likelihood of a successful sale of a business at an optimum price, keep it confidential!

What’s likely to happen if people find out the business is up for sale?

Employees get nervous - They begin to worry if their jobs will disappear or if they’ll get along with a new owner. Some may even quit before you have a chance to reassure them and it will probably be the good employees that leave. They’ll start looking for jobs that make them feel more secure.

Losing key people is serious, particularly during the sale process. Key staff members provide valuable continuity and business knowledge that buyers are looking for. Lose them and potential buyers may be lost too.

Customers begin to wonder - They may become concerned whether the business has problems that could threaten their supply chain. They may start questioning if they’ll get the same quality from the new owner.

Competitors will spread the word - Once the competition finds out, rest assured they’ll let your customers know and use it as ammunition to bring that business to their company. It opens the door for them to steal business from you.

Vendors and creditors may tighten terms - You may be working with terms of net 45 or more to benefit your own cash flow. But once creditors learn that the business is for sale, you may find those terms tightening or notes unexpectedly called due.

On average, a business sale takes nine months to one year. If even some of these changes occur early on, the impact can be dramatic. You’ll find that you’re not only running a business, but you’re busy putting out fires.

A buyer wants a successful operation with few changes until he or she can make those changes. Too many question marks translates to greater risk and lower purchase offers.

Confidentiality is crucial no matter the size of the company or the type of business. To maintain confidentiality, use a professional who understands the process – use an intermediary. An intermediary will market the business in a confidential manner, while providing just enough information to attract the buyers you are looking for.

The intermediary should be diligent in screening inquiries to be sure competitors aren’t out there fishing for details. The intermediary should only be sharing your identity after determining that a potential buyer is seriously interested and is qualified. Those serious and qualified buyers should also be required to sign a binding confidentiality agreement that holds them accountable for leaking information.

You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the time is right will help you to minimize uncertainty and maximize the sale.

The International Business Brokers Association® is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

It is advantageous for a Buyer to take the time to submit a Personal Financial Statement. If you do not have one, you may find one on my site at www.franzjon.com/forms Please understand any information provided to me is strictly confidential and will not be provided to Seller(s) without your authorization. Below I address the reasons Buyer(s) fear them and reasons Buyer(s) should submit them:

Top (3) Reasons the Buyer Fears to Provide Financial Statement:

1. Misinformed about the business-buying process.
2. Not serious about buying a business.
3. Not in a position to acquire the size business investigating.

Top (3) Reasons the Buyer Should Complete a Financial Statement:

1. Increase Negotiating Position:
1. Seller(s) will recognize Buyer(s) ability to get the deal done.
2. Seller may be willing to hold a note:
1. Shows good faith, honesty and establishes credibility.
2. Seller(s) provide more confidential information and records than a Buyer will disclose. Seller(s) do not need to sign a non disclosure because they have no interest or reason to disclose your financials and if they did why would it matter?
2. Buyer(s) able to focus time on the RIGHT Businesses (Business Broker is able to help focus).
3. Allows Buyer(s) to get a handle on personal financial issues:
1. Start thinking of how much willing to invest.
2. Get your spouse or partner on board so that when the time comes for you to write a check together, there won’t be any surprises.
3. Put yourself in a much better position against other interested buyers on those businesses that you can afford to acquire.

It is important for both Seller(s) and Buyer(s) to understand the pros and cons of seller financing. There are both risks and returns involved; however, both Buyers and Sellers may benefit from seller financing when it is understood and properly executed. Below are view points from both Buyer(s) and Seller(s):

Buyers (even if they have the funds available) like the idea of seller financing because:

1. Increase Cash Flow: Sellers often offer 1/3 to 2/3 of the sale price as seller financing (or even higher). This allows the buyer to use their cash for other investments.
2. Seller Faith: Calms the buyers because they understand that the seller is confident in the future of the business.
3. Seller good attitude: After the sale, the seller may be more attentive and genuinely helpful.

Sellers like the idea of seller financing because:

1. Higher Price: They typically receive 20% higher sale price when financing is offered.
2. High Return on Investment: The interest rate they charge may be up to 10% or higher!
3. Risks and Returns: If, for some reason, the buyer does not work out, then they may pocket the cash already received, take over the business, build it back up and then sell it again.
4. Faster Sale: They do not have to wait weeks or months for other loans to be set up.
5. Speeds up the process: Opens more doors to more buyers: other lender financing may not be available.
6. Tax advantages possible (consult your tax advisor).
7. Added Security Provisions:
   1. Personal guarantee from buyer

What are the expenses and who is paying for them?

Commercial Leasing can get confusing because often times it is difficult to understand what the expenses are and who pays what (every landlord advertises differently). Some may charge you one set price which includes all the expenses (Full Service/Gross); another may charge you only for base rent and you are to pay for everything else (NNN); others may charge you for a mix in between (Modified Gross); (Either way, you are to pay sales tax—they typically state that in the contract; however, sometimes they will not and assume you understand that you are to pay sales tax). Attached is a list of expenses that you may incur when you sign a lease. It is in your best interest to understand which expenses you are to pay for and which your landlord will pay for.

Commercial Lease and Expenses

• Base Rent
• Real Estate Taxes
• Property Insurance
• Maintenance
• Utilities (electric/water)
• Building Supplied Services (parking, after hours AC, utilities, etc)
• Janitorial
• Additional Services (plant service, pest control, janitorial services, coffee, furniture/art rental, hvac maintenance, general liability insurance, etc.)
• Association Dues (if applicable)
• Sales Tax

• OVER PRICED: The numbers need to make sense to the buyers. I am able to provide backup to make sure the business is not over priced and the numbers will make sense to the buyer.
• POOR RECORDS: The purchase may not be financed due to inadequate books, records or tax returns. There are very few cash buyers. This may limit the Seller to only cash buyers or holding a note.
• POOR MARKETING: Your business must be packaged and marketed professionally in order to show the full value.