Making an Offer on a Business - VR Business Sales Blog

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Tuesday, March 15, 2011

Making an Offer on a Business

Peter King
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When an offer is made on a business; generally, there are three ways for to do this as well as negotiating price and terms. There is the down payment, the transfer of a property lease and how the financing involved.

Terms of Payment
An offer will include both a down payment and a seller carry-back note from the buyer – i.e. paid over x years at x%. This is based on the value of the business. Any VR Business Intermediary will be able to determine the fair market value of the business where both the buyer and the seller can agree upon.

Fair market value can be determined by the asset values, sales revenues, adjusted cash flow and other pertinent information. Other factors will be taken into place such as transfer of the lease and review of all books, records and operations of the business. Books and records can be reviewed as quickly as one week or as long as four to six weeks.

Transfer of Lease
Landlord is king! If the landlord does not agree to transfer the lease to the prospective buyer, then the sale will not take place. You must discuss the sale with the landlord to see if he or she would be willing to switch the terms to the buyer, and then come to an agreement over continuing the lease or writing up a new one.

Financing the Business
Although, many business owners will prefer to sell their business all cash, this may not be feasible, due to the capital available by the seller. However, insistence on an all-cash deal, generally, will result in a reduced asking price. Buyers can also see about obtaining SBA loans to finance the purchase of a business. However, seller financing will give the better chance of a deal going through at the preferred asking price.


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