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.)
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?