Joan Young's Weblog

How Do Sellers Respond to Banks Tightening Down on Lending?

joanyoung — Fri, 14 Nov 2008 18:35:43 +0000

As banks are being more stringent with their lending criteria, Sellers are being asked to carry a larger note back on the business. This is really a good thing for the Seller if they have a good, qualified buyer. Sellers not only get 7% interest on their note, which is hard to come by these days, and they do not have to pay taxes on the funds until they receive them. This spreads out their tax consequences over the three to five years of the loan.

If the buyer is using the Small Business Administration (SBA) to fund the majority of the loan, the SBA will require that the Seller receive interest only for the five-year period with a balloon after 60 months. The SBA is quite concerned about the Buyer’s cash flow and is making sure they do well in the business.

Having the broker represent you and the other party.

joanyoung — Fri, 14 Nov 2008 18:28:41 +0000

Some people have a hard time getting their arms around the idea of the broker representing both sides (dual agent) in the transaction. In real estate it is rarely done, but in business brokerage for smaller transactions under $3M, it is quite common.

The listing broker knows an awful lot about the Seller’s company. They have interviewed the Seller at length, recast their financials, toured the facility, and typically spent hours with the Seller. They know what is important to the Seller and know their hot buttons. When the agent lists the business, typically the business is listed on many web sites. The potential buyers call the listing agent to get more information. Buyers will sign an NDA (non-disclosure agreement) and an agency relationship form prior to getting additional information, agreeing that the listing broker will also be representing them as well.

IF the buyer is already working exclusively with a broker or does not feel comfortable having a dual agency relationship, then they should not agree to sign the agency relationship form. Buyer should identify the broker with whom they are working before the listing broker spends significant time with them.

If the buyer has signed the agency relationship form agreeing to work with the listing broker as a dual agent and changes their mind down the road after getting all the information and having used a lot of the listing brokers time, the following scenario will occur. If the buyer chooses to have their own broker down the line, the listing broker has no obligation to share their commission with the buyer’s broker. The buyer may be responsible for their buyers half of the commission or what ever the buyer and buyers broker agree to. Be clear from the beginning after you have interviewed the Seller’s broker whether or not you are comfortable working together before signing the dual agency agreement.

How Do I Choose the Right Business Broker?

joanyoung — Fri, 14 Nov 2008 18:25:21 +0000

This is the first and maybe the most important step you need to decide on prior to getting your business ready to go to market. The value of your business and the right time to sell are issues to be handled after a broker reviews your business information. But, right up front, there are some key points that you need to consider prior to signing a 9 month to a 12 month Representation Agreement or Marketing Agreement:

1. Do you like the broker? This may sound pretty basic, but it is important. You will be working on a weekly basis with your broker or intermediary, so you need to like them as a person since you will be working with them for up to a year.

2. Do you trust your broker? This will be one of the most significant decisions you make in selling your business. You want to make sure that the person you are dealing with is ethical, professional, and straight forward with you versus merely telling you what you want to hear.

3. Does your personality mesh with the brokers? If the broker is really loose and easy going (not necessarily a bad trait), but you like lists, details, immediate call-backs and regular updates, this may not be a good match. How the broker handles themselves at the first meeting will tell you a lot. Did they arrive on time? Did they call and confirm the meeting prior to coming? Were they prepared? Did they review the entire selling process and ask for any questions you may have? And, did they listen to you? Listening is a key strength for a broker.

4. How competent are they? Be sure and interview two or three people before making your decision. You want to make sure that they are comfortable with your industry. Were they prepared for your meeting? Are they an active member of the California Association of Business Brokers (CABB) or the business brokerage association for your state? Do they have the distinction of having their Certified Business Intermediary (CBI® ) and or their Certified Business Broker (CBB®) certification? The CBI® is held by less than 10% of all Business Brokers. This tells you that they are quite competent, have taken 60 extra hours of classes in their field and continue to stay current with the industry and market changes.

5. Are they giving your company the best exposure you can possibly get? Ask questions when meeting with them. How will they be marketing your business? How long does it typically take for a business like yours to sell? What is their average time with a listing before it sells?

6. Are they willing to give you a list of referrals who they successfully sold in the last 18 months?

Remember, this business broker is going to be representing you through out the entire sales process from listing to closing the sale. You need feel comfortable with your selected broker and able to trust this person with your business.

Sunbelt Business Brokers Welcomes You!

joanyoung — Thu, 31 Jul 2008 18:25:49 +0000

Joan Young has been working with Sellers and Buyers of privately held companies since 1980. In 2000 Joan purchased the rights to develop Sunbelt in the San Francisco Bay Area. Sunbelt is part of the largest global business brokerage network with over 300 office worldwide. Joan has brokered over 100 transaction from mid-market businesses to “main street” deals. In addition to being one of a handful of brokers that have earned the Certified Business Brokers accredidation,(CBB®), Joan holds the coveted Certified Business Intermediary (CBI®) designation as well.