Frequently Asked Questions
Why use Brookmoor Adams Advisors as your business broker?
The process of buying or selling a business requires dedicated, professional attention. Marketing and facilitating a business transfer is a full-time job! You deserve someone who will work as hard as you do. Our qualified Brokers will save buyers and business owners money by helping them to avoid costly mistakes, effectively marketing the appeal of the seller's business, and maximizing exposure to serious, qualified buyers - all with complete confidentiality.
For example, ask yourself:
How do you reach qualified buyers, including possibly competitors, without disclosing your intentions to sell?
How do you evaluate your business objectively to ensure you receive top dollar for your investment and avoid costly negotiating tactics?
How do you prepare and provide the information a prospective buyer will require to interest him or her in pursuing your business in favor of other options?
How do you arrive at the best price and terms, including the intangible and goodwill values of your business?
How do you maximize your favorable exposure to potential offers while minimizing your potentially damaging public exposure to customers, competitors, employees, and suppliers?
How do you market your business in all of the appropriate markets, databases, and media efficiently, effectively, and confidentially?
How do you screen and pre-qualify buyers, determine their motivations, managerial capabilities, and financial strength?
How do you effectively sell your business, diverting significant time, effort and resources to that process, while continuing to manage your ongoing business productively?
The answer is clear: The sale of your business demands a professional; just as running your business has demanded a professional. The Brookmoor Adams Advisors have the expertise, tools, and connections to market and sell your business successfully on a national basis. We work very hard to protect your business investment and maximize your net after tax profit on the sale. It is to our advantage and yours to obtain the best possible price that a reasonable buyer will pay. We pledge to maintain high ethical standards and open and honest communications in all of our business relationships.
How can I keep the process confidential?
Every buyer is required to sign a confidentiality agreement, which details his or her legal responsibility in having access to your information. The identity of the business is never disclosed before we have this contract on file. In many cases, we also require the buyer to submit a personal financial statement. This serves the dual purpose of financially pre-qualifying the buyer and discouraging frivolous requests from non-serious buyers.
What affects the selling price?
Several factors come into play. Two of the most critical are price and terms. Over eighty percent of all businesses sold are sold with one-third or less down and the owner financing the balance. Asking for one-half down will reduce the price by approximately twenty percent. Asking for cash in a no-debt transaction will reduce the price to forty to sixty percent of the one-third down payment price.
A buyer is trying to buy as much business as possible for the money he has to pay down. When a seller asks for $200,000 down on a $400,000 value business, the buyer will keep looking until he can find a $600,000 value business where the owner will accept $200,000 down and finance the balance. High percentage down payments cause buyers to discount offers. The business owner who asks for all cash is not going to succeed because buyers know they can buy three times as much business for the same investment.
The quality of the information provided to a prospective buyer is critical. The value of the assets and cash flow generated by the business must be provable and verifiable. A professional business broker will be able to assist the business owner in arriving at these values.
Competition among buyers creates higher selling prices. When a business is over-priced or the owner does not offer reasonable terms, there will be few, if any, buyers interested in acquiring the business. When a business is priced realistically, and with proper terms, several buyers are likely to pursue acquiring the business. A buyer who knows he or she has other buyers competing for the business will be highly motivated to offer the price being asked to ensure the business is not lost to another buyer's better offer.
How will my business be advertised?
This is handled in a blind fashion. By that we mean that your business is described but not identified by name. Advertising on the Internet is a very effective means for advertising businesses for sale. We utilize a number of the top business transfer websites available in the world. We also advertise in local newspapers, trade journals, and industry publications.
The advertising of each business will depend upon the size and type of business and the number of potential buyers in our database. Brookmoor Adams Advisors uses the local paper in major cities, the Wall Street Journal, and USA Today Regional. We also market businesses to buyers from other affiliate offices and our database of over 1,000 investment groups to sell larger listings. We publicize listings on our internet site, and send direct mail to prospective buyers who have expressed interest in certain industries to generate as much activity as we possibly can. We also use the BBN web site to advertise our listings. Discretion and confidentiality are greatly considered when we advertise. We do not list the business name, location, or any other information specific to the actual business. We only provide enough information to generate interest with a potential buyer.
What do I need to do to help sell my business?
The first thing you need to do is offer the business at a realistic price and with reasonable terms. You need to provide as much information as is possible to the broker so a professional marketing package can be prepared on your company. The quality of the business profile will greatly enhance the salability of your business. A Brookmoor Adams Advisors’ prepared package will contain 25 to 60 pages of information. Informed buyers make better offers. Other things to remember:
Continue to run your business in a normal manner.
Keep the business clean and organized so potential buyers will like what they see.
Liquidate or set aside obsolete inventory and unneeded equipment before you place the business on the market.
Notify your broker of any material changes in your business.
Forward monthly financial statements to the broker as soon as they are completed. This will keep your marketing package current.
Do not meet with potential buyers without your broker being present.
Avoid direct negotiations.
All offers and counter-offers should be in writing and should be presented by the broker.
Can you sell my business?
A Brookmoor Adams Advisors broker will learn as much as he can about your business in order to prepare a professional Fair Market Analysis. When presented to a qualified buyer, this portfolio will demonstrate the true economic performance of your business by highlighting the tangible and non-tangible values. A professional broker's initial job is to get a business listed at the best possible obtainable price and with realistic terms of sale. The next job is to qualify buyers to keep you from wasting time with people who are not financially qualified to meet your requirement. Qualified buyers will be presented your business profile after they have completed a Buyer Warranty and Confidentiality Agreement. The broker will then schedule a meeting between the business owner and the interested buyer. The business owner will explain the business to the buyer. After this meeting, the broker will work to get a written offer to purchase. The broker will then present the offer and after acceptance will coordinate the due diligence process that will lead to the closing.
How long will it take to sell my business?
On average, we find that it takes 6-9 months to sell a business. The confidential nature of the process is one factor that prevents it from happening more quickly. The fact that each business is completely unique and buyers have varying approaches to evaluating a business is another contributing factor. We handle the time and effort involved in selling your business though so that you can stay focused on running your business.
Who are the different types of buyers?
1. Individual Buyer
This is typically an individual with substantial financial resources, and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both money and time. If these buyers do not have the amount of personal equity required for acquisition, they most likely will turn to family members or venture capital sources for financing. (Buyers and sellers should be aware that, in many cases, seller financing will be an essential element, benefiting both parties in the long run.)
Even when such sources are available, the individual buyer will hit a strong bottom line when it comes to price. Therefore, these buyers will usually limit themselves to transactions involving less than $1 million.
2. Strategic Buyer
This buyer is almost always a company, having as its goal entering new markets, increasing market share, gaining new technology, or eliminating some element of competition. In essence, it is part of this buyer's "strategy" (hence the name) to acquire other businesses as part of a long-term plan. Strategic buyers can be either in the same business as the company under consideration, or a competitor. Example: a bank in one part of a state purchases or merges with one in another part of the same state. The acquiring bank enters a new market and "eliminates" competition at the same time.
Strategic buyers will be looking for a proprietary product with effective management in place and willing to remain.
3. Synergistic Buyer
The synergistic category of buyer, like the strategic type, is usually a company. The difference is that, with this buyer, the acquisition or merger flows from the complementary nature of the purchasing company and the company for sale.
Synergy means that the joining of the two companies will produce more, or be worth more than just the sum of their parts. The benefits of this type of acquisition help both companies be more competitive and profitable.
4. Industry Buyer
Sometimes known as "the buyer of last resort," this type is often a competitor or a highly similar operation. This buyer already knows the industry well and, therefore, does not want to pay for the expertise and knowledge of the seller. The industry buyer is interested mainly in combining manufacturing facilities, consolidating overhead, and utilizing the combined sales forces. These buyers will pay for assets (but probably not what the seller thinks they are worth); they will not pay for goodwill, covenants not to compete, or consulting agreements with the seller. There can be some cases in which the industry buyer is also a strategic buyer, with the price determined by motivation.
5. Financial Buyer
Most in evidence of all the buyer types, financial buyers are influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.
Each type of buyer has distinctive characteristics that correlate to the motivation behind the purchase of a particular company. In addition, the price each is willing to pay for a company is directly proportional to the motive.
Do you have other questions about buying or selling a business?
Send us a confidential email: KLynch@brookmooradams.com