In about 85 percent of all business sales, sellers accept a cash down payment and a promissory note to pay the balance in installments. The note is personally guaranteed by the buyer, and it is secured by the business and its assets in case the buyer defaults. Providing owner financing allows sellers to cater to a broader pool of potential buyers.
However, many sellers don’t want to be in the lending business and would prefer not to hold business notes. The good news is: they don’t have to. If you created a business note to unload your company, you can sell the note to someone else. This way you can get instant cash out of the business, instead of waiting to receive periodic payments in the future. You can use the cash for a variety of purposes, including: capitalizing on other investment opportunities, paying off debts, funding college tuition and making major purchases.
How Selling Business Notes Works
Business notes are purchased at a discount—like all notes sold on the secondary market—to make them attractive to potential buyers. Without a discount, there is no incentive for investors to incur the risk of waiting three to five years or even longer to recoup their money. Historically, more than 90 percent of new business owners fail within the first five years. Therefore, there’s considerable risk attached to the purchase of any business note.
You may receive less than the full balance of your note when you sell it. However, the total cash you receive from the down payment and the sale of the note will usually be about the same as you would have received from an all-cash sale of your business. That's because all-cash buyers can insist on a much lower selling price.
The amount of money you’ll actually receive for your note depends on a number of factors. But as a general rule, for a full purchase, you can expect to be paid 50 to 80 percent of the balance of the note. More specifically, the amount of cash your note can be sold for will be determined by three general components: the current economic environment, the terms of the note (payment amount, interest rate, length of payback, etc.) and the degree of risk or probability that the note holder will lose his/her money.
Criteria for Purchasing Notes
Certain guidelines must be met in order for a business note to be purchased. Naturally, first-position liens are eligible. Here are some other elements investors like to see:
• The business is in a profitable position, with evidence of operating cash flow.
• The buyer has good credit, which generally means a FICO score of at least 625.
• The buyer put down at least 30 percent of the purchase price in cash, which signifies that he/she is truly committed and able to weather down cycles.
• The principal owners have made a personal guarantee on the note.
• The note has been "seasoned," meaning the buyer has made payments for at least two months. This shows that the buyer is happy with the purchase.
• The note should have a minimum face value of $15,000.00.
Structuring the Sale
There are a number of ways to structure the sale of your business note. You can sell the entire note, or only part of it. The most common way to sell a note is through a "partial purchase," which involves selling only a certain number of the remaining payments on your note.
Note buyers can purchase any number of the remaining payments in a variety of ways. For example, let's say you have a note with a balance of $80,000 payable in 240 monthly installments. If you need just $20,000 now, for whatever reason, the note buyer would calculate how many payments would need to be purchased to provide you with that specific amount of cash. Exactly which payments would be purchased would depend on your personal financial situation. You could sell:
• A certain number of the beginning payments on the note. (The note buyer might purchase the first 60 payments, and then you would receive the final 180 payments.)
• A certain number of the final payments on the note. (The buyer could purchase the final 180 payments, passing the first 60 payments through to you.)
• A certain percentage of each of the remaining 240 payments on the note. Perhaps 50 percent of each of the 240 installment payments could be purchased. (You would receive one half of each of the 240 payments.)
So which option in the above example would be best for you? It would depend on your current financial needs and future concerns. All of the alternatives would provide you with an immediate $20,000 cash payment. However, you might choose the first option if you need $20,000 today and require a future monthly cash flow beginning in five years. You might choose the second scenario if you needed $20,000 now and a monthly payment for the next five years until you start receiving your retirement benefits. Or you might choose the third option if you need $20,000 today and also want/need the monthly 50 percent payment for the next 20 years.
The Purchase Process
To purchase a business note, buyers will need to take an assignment of the security instrument (UCC-1 Financing Statement) and receive an endorsement of the promissory note.) But before getting to that stage, they will do the necessary due diligence and closely examine all aspects of the sales transaction of your business. The note buyers will handle all the paperwork for the purchase, from verifying all aspects of the deal and preparing/having recorded all of the necessary documents to make the change.
The note purchasing process takes an average four weeks to complete. If the sale of your business and the creation of the note was "typical," then you should have your money within four weeks.
Selling Business Notes for Quicker Cash
Selling A Franchise Business
Selling a franchise business is not as straight forward as selling your own business. Your franchise agreement will have detailed instructions on the procedures that you need to follow when you take the opportunity to sell your business.
The franchisor will be able to assist you in valuing your business and will probably insist that you use the methods of valuation as set out in the franchise agreement. You will of course be free to seek independent advice and valuations.
Be careful when seeking the advice of experts and always agree the price beforehand so that you are prepared for the final costs and have a chance to negotiate any prices quoted before giving them the work.
It is always worth seeking a second opinion as valuations can vary wildly. This is due to the many variables the valuation experts take into account including future growth potential of your business and values for any properties whether leased or purchased.
The franchisee will have to seek the permission from the franchisor to sell the business. This permission can not be unreasonably withheld or delayed provided that the franchisee has adhered to the terms of his agreement and has found a suitable buyer.
In some cases the franchisee will have to pay a small percentage of the sale price to the franchisor. This can range from five percent to twenty five percent of the final price. The franchisee will also have to pay the franchisor a small sum to do the normal checks on the future buyer.
The franchisor usually has a right to buy your franchise business at the same price as the highest offer received and considered acceptable. This is a normal part of any franchise agreement and is there to protect the franchisors rights. If they believe that you are selling the business at under value, then they could take the opportunity to step in and buy the business for the same price.
The franchisor might also want to take his business back into private control and this is an optimum time to buy the rights back. If this is the case then the franchisor might actually step in and bid higher than the current highest offer.
In most cases the new buyer will not be able to take over your franchise agreement. A new agreement will have to be created for the new buyer and your agreement will lapse. You will have to ensure that all monies due as per the franchise agreement will have to be settled prior to the transaction taking place.
Most franchisors will be able to assist you in the sale of your business if required. This service usually demands a premium and or a higher percentage of the purchase price.
Finally bear in mind that there is always a difference between the valuation and the final price achieved. In some case this difference can be huge. In the end the market place will decide what your business is worth and not the valuation report. At any point in time some business are more in demand then others and can command prices well in excess of their valuation price. Taking all this into account it is better to sell the business when the economy is doing well or at the right side of the economic cycle. By getting the timing right, this can make a huge difference to the sales price achieved.
Selling your Business – Step by Step Process
So finally the time has come to sell the business. After investing years of your time and uncounted thousands of dollars, it has become successful, providing for your needs and wants, and it's time to enjoy the fruits of your labor. Where do you start?
A good time to start thinking about selling a business is right after startup, when it shows signs of beginning to succeed and become self-sustaining. Even if you are planning on bequeathing it to your progeny or a partner, it's never too early to think about what will happen afterwards.
The first step is to take your time--selling a business is a complex process and you will only do it once. Confidentiality is a necessity at this point, as word of an impending sale can cause repercussions among employees and business partners (suppliers, customers, etc.) alike.
Your position in the business is also a point to consider. If you are the sole proprietor, the decision is yours alone. However, if you are a partner or board member, selling your part of the business will involve more considerations.
Finding a good broker is worth any amount of time needed to locate one you are comfortable with. Check the Better Business Bureau for any investigation history, and get referrals from fellow business owners or from industry associations like the International Business Brokers Association (IBBA). This is a non-profit "trade association of business brokers providing education, conferences, professional designations and networking opportunities" (IBBA), as well as professional certifications and boasts over 1300 members.
Next, a professional appraiser should be consulted, as just like selling a home, a professional appraisal will give a fair value to begin negotiations with. Keep in mind though, an appraisal is an estimate of the fair value of a business' hard assets, and the market value of the business may be higher or lower, as a business is only worth what someone else is willing to pay.
Determining major terms and price are issues that you are going to have to work out with your broker, but a few basic factors come into play: what do you want to get out of the sale? Continuing salary? Lump sum? Stock options? This is a step often overlooked until late in the negotiations, often to the detriment of the seller.
Financing the sale is usually about 90% left to the seller. If you can't or won't be willing to cover the costs of the sale, it may not be a good time to sell.
Once you and your broker have located a buyer and agreed on a price, a Letter of Intent is drafted. This letter outlines the terms and tentative price in a non-binding document and allows the buyer time to thoroughly investigate the business. This process is subject to Due Diligence, as the onus of discovery is placed upon the buyer and buyer's agent.
After the discovery process is completed to both parties' satisfaction, the Purchase Agreement is drafted. This set of paperwork creates a formal agreement between buyer and seller regarding purchase price, terms, and other legal details. Once the respective lawyers have finalized the details and complied with state law requirements regarding the sale, the Purchase Agreement is signed, closing documents finalized, and the sale is complete. If everything has gone well, it's time to breathe a sigh of relief and start planning what to do with all that free time!
Selling Your Business And Achieving The Highest Price
When selling your business it is critical that you understand the processes involved. After all, unlike other business decisions this will only be made once!
So here are a few questions that might help you in the process.
Why are you selling? Are you selling because the business has reached its full potential or do you want to get out because you have had enough? It's important to have a reason for the sale as you will get asked this question from all potential purchasers.
Is your property on a lease? If a buyer is looking at your business he will want to see a long term lease in place. Negotiate with your landlord an extension to your lease and make sure that you have a clause in there which allows you to transfer the lease to the new buyer.
When did you last value your assets? This is especially important when it comes to property as prices are constantly changing and you might get a very pleasant surprise.
Do you want to sell just the goodwill and still own the property? Often when selling a business it is possible to keep the property and lease it to the new buyer. If you do not need the full proceeds it is often wise not to sell the property as long term it will be an appreciating asset. Make sure though that you get a full repair and renewal lease put in place with the buyer.
Are you the one hundred percent owner? If not what do the other shareholders think about you leaving? One of the easiest ways to get out is to sell your stake to the other shareholders.
Do you want to protect some workers in your business once the sale has gone through? You might have members of the family or close friends who work in the business and they might need some security after you have left. One way to do this is to provide them with decent employment contracts prior to the sale.
Is the timing right? The best time to sell the business is just after you have had a good year of trading. Even economists disagree about what the future may bring so try not to predict how the trading environment will change but get out when profits are high.
Prime the business for sale. Just as a house will achieve more with a lick of paint and the garden in top condition so a business will need as many loose ends tied up as possible so that it is easier for a new buyer to walk in. Get rid of all the dead stock and dispose of all old and useless machinery.
Tidy the place up. Make it look as attractive as possible and for heavens sake make sure all the light switches and bulbs work. Make sure the place is as bright as possible by using higher power bulbs than normal.
Get professional help. If you have a small business all you need are the services of a good accountant and lawyer. If the business is more complicated a decent business broker might be required to get the maximum price for your business.
The easier you make it for the buyer to move in and start running the business from day one the higher the price you will achieve for the sale.
Selling Yourself As A Freelance Business Writer: Skills, Or Knowledge?
You know the secret to a long-term, and profitable, client relationship is delivering effective communication tools. But you may not realize that the impact of your writing has more to do with your skill as a writer than with your knowledge of the subject.
And unless you help your clients understand the value of your skills, you limit your opportunities to sell those skills again and again.
Every business has its own specialists, people who know more about their products and services than you'll ever know. So why can't they produce great marketing copy, clear user guides, or truly effective training for their employees and sales reps?
Because they don't have the skills that you do, the talent for communicating with impact to achieve specific results. We've all met experts who "know their stuff" but can't share their knowledge -- perhaps your math or physics or French teacher, or an engineer or programmer in a company you know, or even your doctor, lawyer, or insurance agent.
At some point, a company realizes they need help communicating, educating prospects, customers, and their own employees about the benefits and best practices associated with their products and services. They go looking for outside help . . . and then they forget why!
Your long-term success depends on reminding them of that need for communication skills. Most of these experts, whether clinicians or programmers or engineers or legal experts, are more comfortable talking to people just like themselves, rather than creative types like artists and writers.
Left to themselves, they'll hire someone who knows a lot about their area, but perhaps writes only a little better than they do. And a year or two later, they'll be looking for someone else to help them when they realize that all the copy and training content and documentation they have churned out has produced mediocre results.
Help yourself and help your clients.
When you get an opportunity to talk to a prospect about creating effective communications for them, keep pushing the conversation toward the skills they need to pull it off. Make sure they understand their own need for someone different from the resources they already have in house. Help them recognize that your skills complement their knowledge, that it is that combination that produces results in the form of higher revenues, more customers, or enhanced employee performance.
Even if you know their subject matter well, your skills are more important. After all, should their product line change, or new markets open, they may be dealing with a new body of knowledge in a year or two.
But their need for effective communication will remain, and, if you've positioned yourself as the "communication expert" of their team, you'll continue to have opportunities for business from existing clients even as their business practices and markets change.
Business Selling Process (Simple)
1. Determining the fair market value of the business
2. Set Preparing all books and records for prospective buyers
3. Putting the business on the market
4. Dealing with the potential buyer
5. Recieving an offer
6. Negociation - Price, Terms, and Condition
7. Accepting an offer
8. Provide all necessary books and records to the buyer
9. Work with the buyer to remove all contingencies of the contract
10. Signing the closing statement (1~3 days before the closing date at the escrow)
11. The night before the closing date
How To Create A "Unique Selling Proposition" For Your Home Based Business!
No matter what type of business you are running (or plan to build) you will likely have competition. Most people think competition is a bad thing – and if you try to take on your competition “head on” it probably is.
On the other hand, you can use your competition to learn how to service customers in a different way – a “unique” way – that can make you very successful!
How Can You Make Your Business Unique"
For example, selling home videos. DVD’s, and electronic games is nothing new. And unfortunately for most “mom-and-pop” video stores, Blockbuster came along, and put most of them out of business.
So why bother even trying to sell videos and DVD’s, right? Well, it depends.
Opening another video store would probably be difficult – having the ability to order 20-30 copies of all the popular videos would probably be too costly for most people.
But NetFlix didn’t look at competing directly with Blockbuster. The owners decided to rent the same products, but in a completely different way – online and through the mail.
That’s an example of a Unique Selling Proposition!
How can you create a USP (Unique Selling Proposition) for your business?
Answer the following 5 questions:
1. What does your business sell, and who do you sell it to?
2. What benefits (not products or services) does your business offer to your customers?
3. What does your business do best?
4. What part of your business needs the most improvement?
5. What do you offer that you do better –or different – than your competitors?
If you need help coming up with ideas for the last one – which is the most important question to answer – go out and “shop” your competition:
• read their ads
• check the yellow pages
• do a search online and compare websites
• buy a product (or ask a friend or family member, if possible)
• join a small business association
Then, narrow down your USP into one or two sentences, and do it – with every letter you write, every ad you place, every customer you serve, every plan you make – and include your Unique Selling Proposition.
If you can make your business different from the rest – and stand out above the competition – you’ll be well on your way to success!
Business Selling Guide (Detail)
Business selling process can be very easy with this useful guide wich will guide you through the business selling process. You can find out what to prepare and what to expect. The following information is basic steps of business selling process for business for sale for seller. BusiMarket.com does not guarantee or indorse the accuracy of information.
1. Determining the fair market value of the business
The business value really depends on the type, the age, and the location of the business. For more accurate information, We highly recommends discussing values and amounts with your business broker, attorney, or loan officer. If you already know what your asking price going to be, you can move on to next step.
2. Preparing all books and records for prospective buyers
Things to include in your business books / records:
last 3 years of busines income tax return
up-to-date Profit & Loss Statement / Balance Sheet
a copy of the Original Lease & Sublease Agreement
an up-to-date equipment list.
3. Putting your business on the market
. The following are options for putting your business on the market:
Input your business on Business Multiple Listing Service Sites like BusiMarket.com - Business For Sale or Companies like us
Advertise in a local newspaper
Hire a real estate broker or agent.
4. Dealing with Potential Buyers
Evaluate the Buyer:
Is the buyer financially secure?
How much business experience does the buyer have?
Is the buyer serious about buying your business?
5. Recieving an offer
The buyer writes an written offer and presents it to the seller. If there is a real esate agent involved, then the agent will deliver the written offer to the seller.
6. Negociation - Price, Terms, and Condition
The seller and the buyer negociate the price, terms, and conditions.
7. Accepting an offer
At the end of the negociation process the buyer and seller must sign and date every page of the Purchase and Sale Agreement.
8. Provide all necessary books and records for the buyer
Usually within 1-2 business days after mutual agreement.
9. Work with the buyer to remove all contingencies of the contract.
10. Signing the closing statement (1-3 days before the closing date)
After the buyer removes all contingencies on the Purchase and Sale Agreement, both the buyer and the seller make an appointment with the Closing/Escrow agent to sign the closing statement - usually 1-3 days before the closing date.
The buyer should call the escrow agent and find out the total amount of money that needs to be prepared (usually casher's check or money order) for the remainder of the down payment.
On the signing day, the buyer pays the money to the escrow agent and sign the closing statement
The escrow agent collects the money from the buyer, and the bank that the buyer financed, and pays the toal amount to the seller (down payment + loan amount - closing cost).
11. The Night Before the Closing Date
Both the buyer and seller meet at the business site after the business hour and
Review the Equipment List that is provided at the time of the acceptance of the Purchase and Sale Agreement
Get paid for Inventories and Supplies - write down all the items on a piece of paper with the wholesale price of each items. The buyer and seller sign on the grand total and the seller receives the total amount from the buyer.
Seller gives the business key to the buyer.
12. The closing date
Congratulations, You've Sold Your Business!!!
How To Set Up A Business Selling Your Own Shopping Cart Solutions
As we speak, an endless number of small, medium & large companies in all types of niches are planning to build their web presence. It doesn't matter what they sell - some may be import/export companies, others might sell DVDs and others still may deal solely in digital products. Some will have turnovers that barely touch $100,000, while some will be yielding millions per year.
What do all these companies want and need that you can give them - right now?
The majority of them will seek out some type of shopping cart software or service. You can bet, the first sub-point in the MD's notepad for web development would be something along the lines of "Find best way of accepting web orders". And that's where you come in.
You see, the potential reward of offering a cart solution to these new web businesses are very good indeed - in the U.S. alone, there are almost 230,000 monthly searches for the term "Shopping Cart" (top 3 engines only) which should provide you with some indication of the market size. While there are a few services and software that already exist for this, they tend to be pricey - the business either has to fork out monthly fees (for example Volusion that charges upto $197 for their monthly cart service), or SumEffects which at $349 is a one time fee, but still pretty steep.
But, the fact is, businesses will pay these fees with their eyes shut and today you can own the rights to a powerful shopping cart solution that you can offer them.
Here are the features you will need to ensure that your software offers your clients:
- Ease of use & set-up.
- Search engine friendly design.
- Unlimited number of potential products. With many carts, higher prices are charged the more products you offer. The majority of the "free" ones only let you offer five or ten items which is insufficient for the majority of businesses.
- In built newsletter management.
- Product database that can be searched.
- Compatible with various payment gateways (including Paypal).
- Powerful sales analysis & tracking.
Ordinarily, this type of software can cost upwards of ten thousand dollars to develop yourself. But if you don't have this much then don't worry, you can actually pick up the resell rights to powerful shopping cart software for a fraction of that cost (as little as fifty dollars if you know where to look). Resell rights allow you to repackage the software and offer it to your own clients and keep 100% of the sale proceeds.
We're just seeing the tip of the boom for these types of software. Ultimately, every business will have to come online and accept credit card payments - what an opportunity for those that offer a powerful shopping cart solution service!
Build A Home Business Through Promoting And Selling Digital Products
Building a home business empire through promoting and selling digital products is more than possible. Just ask one of the thousands of people who are making it big by doing this. Sure, you are going to have to work hard just like any other home business, but the good thing is that there is plenty of potential for success. Before you can start to build this type of home business you must first consider the steps that you need to take.
The first step in building a home business based around digital products is to decide what you are going to sell. You have two options. You can either create your own digital products so that you collect 100 percent of every sale, or you can become an affiliate to other products. This gives you the ability to skip the creation phase, but at the same time, affiliates only get paid a certain amount of the sale price.
Now that you know what digital products you want to sell, the next thing to consider is how you are going to promote them. For most home businesses in this industry, promotion is done best through a killer website. This may not be something that you can put together on your own, so you should definitely look into getting help. Remember, your website is where people will find what you are offering for sale. If it does not do a good job of converting visitors to buyers you are not going to make a lot of money. For this reason, it is very important that you take the design of your website seriously. Remember, the money that you put out up front will pay off in the long run.
When trying to build your home business you will find that a lot of success has to do with the amount of traffic that your site receives. Generally speaking, the more traffic you get the more sales you are going to make. When you think about it, selling digital products is nothing more than a numbers game. As long as you get enough people visiting your site you should be able to make steady sales. Of course, you will have to tweak your process along the way, but that is to be expected.
One of the keys to home business success with digital products is tracking your results. What products are most visitors buying? Which ones are they staying away from? Are there any changes you can make to increase your sale ratio? When you know what is working and what is not, you can then make the changes that are best for you.
If you want to build a home business empire, consider doing so through the promotion and sale of digital products.
Copyright Paul Majestyck
Launch a successful business selling your art or crafts
Define your goals and get organized - What are your goals as an artist? Do you hope and dream to one day have your artwork displayed in a museum or do you just want to sell enough of your art to make a good living? Defining your goals is an important first step toward your success as an artist. Realize your long-term goal and then set reasonable and attainable short-term goals.
Build your confidence - You need to believe in yourself and your artwork. If not, your marketing efforts will be less effective as the fear of rejection will hold you back. You have to learn to take risks. No one is going to come knocking at your studio door. Get out there and meet new people, network with other artists, open a booth at an art show, etc.
Get in a business mentality – If you want to be successful with your art business, then you will have to learn how to juggle more than one task. This means learning how to become successful as a businessperson. The artists that are most successful have learned how to enjoy both creating and marketing their art.
Art fairs – Art fairs open up great doors of opportunity for artists. They enable artists to market directly to the public without the need of an agent. The public loves art fairs. They usually come to these art fairs with the intention to purchase something, which creates more opportunity for an artist to make a sale and get recognized. You can find a wealth of information about art fairs online. One such place is http://www.sunshineartist.com/. Sunshine Artist is a great magazine that provides detailed information about art fairs and festivals. Check it out!
Follow up – You must get into the habit of following up with anyone who has shown interest or has appreciated your art. That person who saw your painting in the doctors office, or the person who took your business card at your last art show are leads who can possibly turn into paying customers. They may also be able to help you in other ways you never thought possible. It’s important therefore to keep in touch with everyone. Create a mailing list and ask your contacts if they would like to be added. You can send out mailers whenever you create a new piece, or to notify your contacts of upcoming exhibits or art fairs you will be attending.
Customer service – You must go above and beyond your customer’s expectations if you want to set yourself apart from the competition. Make sure you treat your customers and leads with the utmost professionalism. Answer all inquiries promptly. Send out thank you notes and instructions for preserving and caring for the art with all of your orders. Customer service is important to all businesses, and your art business should be no exception.
Artist agents - You are your own best agent. No one knows your art better then you, and no one can express yourself and your art better than you can. An agent generally deals with more than one artist at a time so their focus is not on you and your art alone. Agents usually charge a lot of money as well. By the time it’s all said and done, the artist doesn’t make very much on the sale. It’s better to learn the ropes yourself and learn how to reach your buyers directly.
Get your own unique website - The Internet has become a huge platform for selling goods and services. More and more people are going online then ever before and artists are taking advantage of this amazing opportunity. If you want to expand your business and reach more people on a worldwide scale, you should definitely consider getting your own website. You can market and sell your artwork directly online with your own website. Your website is also a great way to organize and showcase your art to interested galleries and the people you meet in public.