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Selling a Small Business Fast – Here’s How

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

Once you decide that you want out of your business or that you can’t fix the problems, you should sell as fast as possible. If that is the case, the best way to sell your small business fast is to help your buyer find the money to pay for it.

(First, of course, you should know what your business is worth and find a buyer who will place a high value on it.)

Of course, you should get a substantial down payment. It’s wise to ask for 30% to 50% up front. This just keeps everybody honest.

If you can afford it, you might accept the balance over a period of three to 10 years. This depends on your financial needs. If you go this route, don’t accept an interest rate of less than 8%. I know that bank rates are much lower than that now, but this is a business loan – not one that is FDIC-insured. As a result, you have a greater risk of default, which you need to be compensated for.

Remember to get a business attorney to arrange the agreement and make sure the new owners put up collateral to back up the loan. What you don’t want is to sell the business to someone who is going to pillage the company and then give you back an empty shell. While you’re at it, make sure the buyer is forced to have proper business insurance.

If your buyer doesn’t have the necessary funds, there are plenty of ways to help her:

1. Use the assets.

The new owner can take the assets of the company and raise cash quick. She can refinance the property or possibly discount the accounts receivable to raise money. You don’t care because you’ll have your cash and no risk.

Neal’s Notes:  One of the best way to enhance the value of your business is to keep a tight lid on employee theft.  This brings more cash to the bottom line – a very good thing.  Theft is a much bigger problem than you might realize but it’s relatively easy to clamp down.  Once you do make sure to show your would-be buyer how you did it.  That makes your company a lot more valuable friend. 

2. Encourage your buyer to partner up.

If you find someone who loves your business and would be a perfect new owner but hasn’t got the Benjamin’s to make it happen, encourage her to find an equity partner who does have the money. You might even give her the names of the other people who expressed interest in the company (with their permission, of course). Your buyer could approach these people to ask if they have any interest in being partners.

3. ESOPs Fables

ESOPs are Employee Stock Ownership Plans. The new owner can sell non-voting stock in the company to employees. She’ll maintain control and still get the business with just a fraction of her own money.

4. Lease with an option to buy.

Consider leasing the business to the new owner with an option to buy. This might be a great way to go if you are having some reservations about the buyer. Get a nice down payment from the seller as an option price. The buyer will work with you for a year or two before she can exercise the option. This way, you can make sure she is a solid buyer. If she doesn’t pass muster, you keep the option money and she takes a walk. Nice.

The bottom line is, you want a good solid qualified buyer. Don’t sell to someone who doesn’t have the liquid assets and experience to make the business a success. If the new buyer doesn’t have enough cash to keep the business alive, you’ll inherit the business without wanting to.

Have you sold a business using a unique approach? What was it?

 

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Comments

  1. christina curtin says

    July 31, 2018 at 4:13 PM

    We have a business that is service only, we don’t own the building we work out of and have been told it will be difficult to sell, is that true, we gross between 1.1 and 1.5 million a year

    Reply
    • Neal Frankle, CFP ® says

      August 2, 2018 at 6:09 AM

      What is your net?

      Reply
  2. Kevin Ho says

    September 30, 2012 at 4:31 PM

    Hi,
    I have a pearl jewelry wholesale company which has been in business since 2005. I would like to sell it as fast as possible. I need some cash right now due to my personal problem. I think my business worth about $160,000-$20,0000. I can offer $120,000 if you have a buyer wants to buy it now. I only need $70,000-$60,000 as the downpayment, the rest I am willing to provide a business loan. Please contact me if you think you can sell my business fast. My business has about 250-300 active jewelry retailers in the east coast selling our products.

    Sincerely,

    Kevin Ho
    Sept. 30th 2012

    Reply
  3. Jessica07 says

    January 21, 2011 at 8:43 PM

    I love the idea of HELPING someone buy your business. By knowing the worth, you’ll be more likely to get that actual amount, if you help that buyer brainstorm ways to get the money. Default is always a risk, but one that can be minimized with a nicely drafted sales contract or promissory note.

    Reply
  4. sandy @ yesiamcheap says

    January 20, 2011 at 7:31 PM

    I’ve heard of owners essentially selling businesses to the employees. Do you know how that would work? Is that some kind of stock deal? I’m not talking a mom and pop operation with one or two employees but say you had 50 or so employees that would like to pool to buy the business.

    Reply

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Who is Neal Frankle

Neal Frankle

I'm a CERTIFIED FINANCIAL PLANNER™ Professional with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
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