San Francisco Bay Area :: Business Sales, Valuations, and Advisory Services for Privately Held Companies

A business must be profitable to be salable. Due to the cost of living in the Bay Area, it's difficult to sell a business that's not providing at least $75,000 in earnings to the Owner. However, ABI has sold lots of businesses that didn't meet this mark. Call to find out more. As a general rule, the more profitable your business is, the better chance you have of selling it successfully. It's important to plan for a sale. For more information on how to plan, click here.

On average, it takes between 4-8 months to sell great businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner we have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that businesses be priced properly right from the start. Some Owners, operating under the premise that they can always come down in price, overprice their business. This theory often "backfires," because buyers often will refuse to look at an overpriced business.

It has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment, generally 40% of the asking price or less, the shorter the time to a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business's ability to make the payments. When you want 100% cash at closing, you can expect a price 20-40% less than if you offered to finance a portion of the sale.

Business brokers are the professionals who will facilitate the successful sale of your business. As your business broker, we can help you decide how to price your business and how to structure the sale so it makes sense for everyone. We can find the right buyer for your business, work with you and the buyer in negotiating, and coordinating every step of the way until the transaction is successfully closed. We will also help the Buyer in all the details of the business buying process.

A Business Broker is not, however, a magician who can sell an overpriced business. Most businesses are salable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept along with the terms of the Seller financing can greatly influence not only the ultimate selling price, but the success of the sale itself.

Surveys have shown that an Owner who asks for all cash receives on average only 70% of their asking price, while Owners who accept terms receive on average 86% of their asking price. That's a difference of 16%! In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most Owners are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the total proceeds. And again, it tells the prospective buyer that the Owner has enough confidence that the business can pay for itself.

You can cooperate fully with us and any other professionals that you are using. A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business sales process. Time is of the essence in any business sale transaction. Staying on top of everything and making yourself available to meet or answer questions is essential. The failure to proceed on schedule permits the buyer to reconsider or make changes in the original proposal.

And, finally, your team of advisors must all be working towards the common goal of selling your business for the best price and terms available in the marketplace, and closing the sale as quickly as possible! Remember that, as your professional business broker we are on your side. Only by being as cooperative as possible with us can we best handle your business interests.

Confidentiality is likely your primary concern. If it is not, it is a close second. ABI intimately understands this concern and has developed a proven process for selling businesses confidentially. You can rest assured that ABI will handle the sale of your business with the utmost care.

First and foremost, when ABI takes an engagement, it is clearly understood that confidentiality is a mainstay of our operation. When ABI advertises your business, it is done using "blind," or confidential profiles. We provide enough information to entice a prospective Buyer to inquire, but not enough information for someone to figure out that it is your business. In fact, you may visit our Listings page to see how we confidentially market the businesses we represent.

Once we receive an inquiry from a prospective Buyer, he/she is required to sign an industry standard Non-Disclosure/Confidentiality Agreement. This document stipulates that the prospective Buyer cannot disclose any confidential information about your business. Additionally, he/she will be required to complete a profile so that ABI may gather more information about his/her background. This allows us to pre-screen Buyers to ensure they have the ability to make a purchase. Once we have received both items, we schedule a meeting with the Buyer at the ABI office to educate them on the buying process. Only after this screening process is complete will we arrange a face-to-face meeting between you and the prospective Buyer.

The best time to sell is when your business is growing and you are under no time constraint.

There really is no more to it than that. The more time you have to prepare your business and the more time you have to market your business, the better off you are. When timing becomes an issue, you almost invariably accept a lower price and worse terms than you otherwise would have. The minute you even begin to consider selling as an option contact us and schedule an appointment and learn about the process.

An attorney is an important player in your team of advisors and having an attorney who specializes in business transactions is invaluable. This is an important point--like medical doctors, attorneys have specializations. When you are having a heart problem, you do not see a dermatologist. When you have a business question, do not call a medical malpractice attorney. It simply does not work.

Bottom line is that an attorney is paid to protect his or her client from legal problems--that is their specialty. When it comes to selling a business, you will be hard-pressed to find an attorney who can provide the level of expertise that a professional business broker will provide. Attorney's are not involved in the business market on a daily basis. They probably are not seasoned veterans at business valuation or identifying value drivers and are definitely not experts at creating compelling marketing materials or effectively marketing your business. Further, attorney's are not well equipped to manage Buyers or the due diligence process.

ABI believes in getting paid for performance. We never charge up-front fees and do not expect to be paid until we successfully sell your business. No attorney in the world will work with you under these conditions (and if they will, they most likely will expect 30-50% of the proceeds from the sale).

If you have a legal question, call an attorney. If you have a question about selling your business, call ABI.

Certified Business Intermediary (CBI) is the designation awarded by the International Business Brokers Association (IBBA) to members that have satisfied the educational requirements and conform to the ethical standards of IBBA.

A CBI is an experienced, proven professional whose claim of competence is supported and documented. With the proven skills necessary to handle the marketing, negotiations and complex details involved, a CBI can successfully complete the purchase or sale of your business.

A CBI has these distinctive credentials:

• A higher level of education and training.
• Professional affiliation with hundreds of other intermediaries on the local, national and international levels.
• The most current industry information with respect to taxes, investment, legislation and other areas of critical importance.

What are the CBI Requirements?

Education - A CBI must complete a minimum of 60 class hours of business brokerage courses offered exclusively through the IBBA. A CBI must demonstrate an ongoing commitment to professional development through continuing education and periodic recertification.
Experience - Competence in the application of knowledge gained through practical experience. A CBI must have a combined minimum of three years experience and education in business brokerage.
Knowledge - A high degree of knowledge garnered through the completion of required courses and the passing of its respective examination.
Examination - The successful completion of a comprehensive examination.
Ethics - A thorough knowledge of, and loyalty to, the IBBA's Code of Ethics.

Every CBI has undergone a specialized course of detailed training, aimed at making the process of buying or selling a business as smooth and worry-free as possible.

A CBI brings special qualifications to your needs:

• Membership in the IBBA, an international association serving the business brokerage industry. Every CBI is part of a network of professionals.
  
• Successful completion of the courses leading to the Certified Business Intermediary designation - one of the most successful intermediary educational programs in the world. Every CBI is a professional equipped with special expertise as a result of advanced study in listing, selling, investment, taxes, valuation and more.
  
• A history of demonstrated sales performance through the documented execution of business sales transactions.

ABI has a very aggressive marketing approach, yet all our advertising is done very confidentially.

To start, we search our own proprietary database of Buyers. These are pre-screened Buyers who have inquired about other businesses that we had available, but did not make a purchase. We also use our network of professionals to spread the word that we have a particular type of business for sale. This pool of pre-screened Buyers is only available to ABI clients. Having dozens of businesses on the market being heavily advertised expands this collection daily. Very few people buy the first business they inquire about.

As we contact all the Buyer's in our proprietary database, we also advertise your business on the internet. Over 90% of all inquiries we receive are from internet advertising. ABI advertises on all the major business-for-sale websites to ensure maximum exposure. Also, ABI is one of the only business brokerages in the Bay Area that still advertises regularly in newspapers.

Competitors or other company's that may receive synergistic value by acquiring your business are often not actively searching for opportunities. If your business may be a attractive to these businesses, we will initiate a direct mail and telemarketing campaign to entice this group.

If your business is larger, it may be appropriate to contact Private Equity Groups (PEGs). These are groups of professional investors who have raised funds to invest in small businesses. Typically, PEGs look for companies with at least a $1MM EBITDA.

If there's an opportunity to locate prospective Buyers via non-traditional means such as posting flyers in union halls or advertising in trade journals, we will seize the opportunity in addition to our standard marketing approach.

Bottom line: there's no question that if someone is looking to purchase your type of business, they'll easily find our advertising.

The value of any business depends on the needs and perspectives of each individual Buyer. Value is related to risk and the ability of the business to generate and income stream that is comfortable for the Buyer.

Start with the basics:

• Review the tangible assets (FF&E)
• Recast (or normalize), confirm, and review Sellers Discretionary Earnings (SDE)
• Review factors that can impact future earnings
• Review valuation approaches with your ABI Intermediary
• Perform an investment analysis to determine net cash flow after debt service

There are three basic approaches to value:

1. Asset Approach: Fair Market Value of the assets of the business
2. Income Approach: A multiple of earnings based on Sellers Discretionary Earnings
3. Market Approach: Commonly referred to as Comparable Sales Approach. Historically, what have similar type businesses sold for?

In many cases there are some common averages:

• Two to Four times annual Sellers Discretionary Earnings
• Fair Market Value (FMV) of Furniture, Fixtures, and Equipment (FF&E) and inventory plus one year's Seller's Discretionary Earnings

A one-size-fits-all valuation method does not exist. Each business will be valued differently because each business (and every Buyer) is so different. Further, different appraisers will often come up with a wide range of values for the same opportunity. Value is definitely in the eye of the beholder.

Regardless, the final price must make financial sense:

• Must cover debt service
• Must provide a reasonable income for the Buyer
• Must provide a reasonable Return on Investment (ROI) for the Buyer
• Must allow for working capital fluctuations

ABI will perform a complete market valuation for you free-of-charge. If you are interested in receiving a valuation, contact us to schedule an appointment.

ABI will credit you a portion of the success fee. ABI typically offers an Owner the same 10% referral fee that other licensed real estate brokers receive when they refer Buyers to us.

Any business owner who has sold a business on his of her own will tell you it's a long, tedious and stressful process. It consumes time and distracts you from the day to day operation of the business. When your focus should be on maintaining or increasing the value of your business, all of your time and energy is directed to the sale process.

That's where an experienced business broker can pay huge dividends. There are many areas where the business broker expertise pays off:

• Confidentiality. If you as an owner attempting to sell your own business, that process alone reveals that the business is up for sale. Employees, customers, suppliers and bankers all get nervous and competitors look to make a kill. A business broker will protect the identity of the company and contact only owner approved buyers through a blind profile - a document describing the company without revealing its identity.
• Business Continuity. Selling a business is time-consuming for an owner who already is probably wearing many hats for the company. By taking on the additional load of selling the business, essential functions will get less attention and possibly damage to the business. The owner can maintain a focus on running the business when a broker is working on the sale.
• Reaching potential buyers. Business brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for the skills and capital that would enable a potential acquisition. You only speak to pre-screened buyers saving you hours of time.
• Comprehensive Marketing. A business broker can help present your company in the best light to maximize the sale price. He or she has an understanding of the key values that buyers are looking for and can assist in identifying changes that will lead to a better selling price. Your business will receive much more exposure than simply posting your business on a website. Very few buyers purchase the first business they inquire about; all prospective buyers will be exposed to your business even if they didn't initially inquire about it.
• Valuing your Business. Putting a value on a business is far more difficult and complex than valuing a house. Every business is different, with hundreds of variables that have an impact on the value. Business brokers have access to business transaction databases that can be used as guidelines or reference points. But the best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business, which is much more likely using the resources of a professional business broker.
• Negotiating. An experienced business broker is well versed in negotiating. He/She is also a neutral party that acts as a buffer between the Buyer & Seller. Every transaction has problems and that's when your business broker shines. You may never find out what happened behind the scenes and many times the broker can solve these problems without the owner to retain a higher selling price that will more than compensate for the success fee.
• Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. An experience business broker can level the playing field for a business owner making his one and only business sale.
• Closing a Deal. Since the business broker's sole function is to sell the business, there's a much better chance that a deal will be closed in less time. The faster the sale, the lower the risk of employee problems, customer defection and predatory competition.

Utilizing the services of an experienced, professional business broker allows the owner to focus on running the business reducing the risk of business erosion during the sale process. A sale facilitated by a business broker helps maximize sales proceeds by involving a large universe of buyers in a confidential, competitive bidding process.