Frequently Asked Questions About Selling a Business in Raleigh, NC
As the most trusted business broker in the Raleigh, NC area, ENLIGN is here to answer some of the most frequently asked questions about selling a business. Take a look below. If you don’t see an answer that addresses your questions, contact us here or call (919) 341-1100.
Q: How long does it take to sell a business?
A: It depends.
The time required to sell your business depends on multiple factors, namely: the industry, location of your business, price, size, profitability, and who you have representing you during the sales process.
Business Brokerage Press’ annual survey of business brokers in 1992 found the average time to sell a business was 4.8 months. In 2015, Market Pulse survey results show 6-11 months sorted by transaction size.*
Note that this only accounts for businesses that sold. The increase in time is likely attributed to perceived difficulty in buyer financing.
At ENLIGN, our 2016 closings were heavily concentrated around 7 months, with outliers from 3 months (not common) to 47 months (also not common).
Q: How much does it cost to sell a business?
A: It depends.
Within the business broker industry, a fee is paid to the broker for managing a transaction through closing. This is referred to as a “Success Fee”.
ENLIGN charges 10 percent on transactions up to one million dollars. That represents a $100,000 commission for the sale of a million dollar business. Also, unlike most business brokers, ENLIGN charges a listing fee (usually $2,500) that is subtracted from the commission at closing.
Sound outrageous? It’s not, and here’s why:
In a business sale scenario, you want your business to sell. Selling a business is extremely difficult with many, often complex, moving parts. An experienced business broker will ensure that you receive the maximum market value, minimize the time required to close, reduce your stress and most importantly actually sell your business.
Example: ENLIGN negotiated a term with a client that increased the sale price of their business by over $400,000 – almost completely covering the commission paid on the entire transaction with that single term.
Q: Is my Raleigh business really ready to sell?
A: It depends on how long you’ve owned your business.
Most professional business brokers recommend owning your business for a minimum of two to three years before thinking about selling. This allows you to accrue a few years worth of accurate tax returns, which can help demonstrate the maximum profitability.
Q: When is the “right” time to sell my business?
A: Sell your business while it is doing well.
Many business owners make the mistake of trying to sell their business once it starts to decline. This is the opposite of what you should do! Keep in mind that you’re trying to attract buyers. Think about it: would a buyer be more attracted to a business that is at the top of its game or a business that is falling by the wayside?
Q: How much detail do I give as to why I’m selling my business?
A: Give as much as is absolutely necessary.
You don’t want to be misleading, but you also want buyers to believe in the unlimited potential of your business for future, continued success. To do this, you should work with your business broker to craft a response that articulates why you are selling your business while talking about the future vision for success.
Q: Why does my business’ market penetration rate matter?
A: It demonstrates future growth potential.
Buyers (especially those who are new to the area or industry) often want to see what sort of room for growth your business has. It is also a way for buyers to better understand your industry, the current market/economy while helping them think through how they may plan for the future.
Q: If I have employees, how do I help protect their futures?
A: Identify them as key team members for success.
Sometimes, when business are bought and sold to other people, there may be a shakeup in management and employment. If you believe that your employees were a critical piece in the success of your business, make your case to the person(s) who are interested in buying your business. Take note of key players, and provide information on how other employees may contribute to the future success of the business.
Q: What makes my business unique?
A: Determine what your Unique Selling Proposition (USP) is.
Raleigh, NC is a competitive area for new and old businesses. If you have competitors in the local industry, determine what products and/or services you offer that are unique. Keep in mind that buyers may not always know who the major competitors are or how competitors may pose a threat. You’ll want to be sure that you clearly identify who the competition is and how your business is different.
ENLIGN, provides confidential consultations to Raleigh-area businesses that are interested in selling their business. Contact us or call (919) 341-1100 today.