MOST FREQUENTLY ASKED QUESTIONS-SELLER
How can the Seller prevent its employees, customers, and vendors from knowing that the business is for sale?
Confidentiality is, perhaps, the most critical issue. Most Sellers do not want his employees, customers or vendors to know that their business is for sale. Scarborough Commercial Group requires a Confidentiality Agreement be executed by the potential Buyer before they have specific knowledge of the business.
Is it better for a Seller to engage a Certified Business Intermediary (CBI) to sell their business or sell it on their own?
A CBI can bring significant value to the complex process of selling the business and ensuing the best possible value for the business. Another benefit to using a CBI firm such as Scarborough Commercial Group is the existing pool of hundreds of qualified buyers who are actively looking to buy businesses in various industries.
What are the eight steps to selling the business?
- Step 1: Select and Retain Advisors
- Step 2: Business Valuation
- Step 3: CBR/Marketing
- Step 4: Buyer Qualification
- Step 5: Due Diligence
- Step 6: Negotiation/Offer to Purchase
- Step 7: Financing/ Term Sheet Structuring
- Step 8: Closing/Funding
How long will it take to sell the business?
There is no set time. An average time is approximately eight to nine months.
Is the Seller allowed to transfer a long-term lease to the Buyer at the time of sale?
Most leases will have a clause that defines the landlord’s rights regarding the transfer. Often the Seller is required to remain as a guarantor on the lease.
What will be the commission structure on the sale of the business?
In most cases, Scarborough Commercial Group will not charge a retainer. We will receive a commission on the sale of the business at closing.
How does Scarborough Commercial Group assist in determining the value of the business?
Our advisors are experienced and knowledgeable of the necessary steps to determine the value of the business. In the end, however, the market will make the final determination of value.
Is the Seller required to sell the land which its business is located to the Buyer at the time of the sale?
No, the Seller is not required to sell the property to the Buyer. This is a negotiated item and the determining factor will be what is best for the sale of the business.
How is the cash, receivables, payables, and inventory accounted for at the time of the sale?
Many businesses are sold with the Seller retaining the cash, receivables and being responsible for the payables at the time of transfer. The inventory is generally transferred to the Buyer at the time of sale.
What financial records are required by Scarborough Commercial Group for the sale of the business?
Accurate financial statements, cash register receipts or whatever records are necessary to prove income and expenses and the last three years of business tax returns.
How does the due diligence process work?
During the due diligence process the Buyer will check facts, review financials, and make sure that the information they had based their offer on is accurate. This period can vary in length, generally 30 days.
What are the six most important things a Seller can do to prepare for the sale of their business?
- Receive a business valuation from a qualified Certified Business Intermediary
- Work with their accountant to have accurate financial records
- Be clear and realistic as to the profitability of the business
- Organize the legal documents with a competent succession planning attorney
- Have a defined management succession plan in place for the new Buyer
- Keep working the business to its highest potential
When should a Seller start preparing for the sale of their business?
The day it opens for business. A successful business owner will one day be a Seller.
When is the best time to sell the business?
The best time to sell the business is when it is doing well to secure the highest value.
Is an accountant and attorney necessary for the sale of a business?
Buying or selling a company can be a complicated business transaction. Scarborough Commercial Group requires that both the Buyer and Seller engage competent legal and accounting professionals to represent their interests in the sale.
