Five Key Considerations When Selling a Small Business

Selling a Small Business

When you’re ready to retire, you may be able to hang onto that business for years – much longer than you, the former owner, would have imagined. Yet at some point, you need someone to take over that operation – someone or something will do it.

Business brokers are valid resources for finding opportunities to sell a small businesses, but restaurant brokers are a different story. When its time to sell a business you can expect a poured-over flood of interest. You have to set your sights high, and expect to pay the going rate in order to sell your business for a net value determined in the valuation process. It stands to reason that not everyone is good at valuing businesses, and even harder to buy without knowing what your business really worth is.

There are five important aspects to consider when going about selling your small business.

Cash flow

To be truly profitable, your business must generate money, even in the quiet hours between orders. Most businesses that are poised for sale only have a year or two left at best. But a restaurant or other small-scale business can be sold into a cash with little loss in liquidity. However, when business valuations play into tally, you’ll get a second chance to strengthen or fix this equation before you succeed.

Sales projection

Most restaurant brokers will go over your bank statements or other paper transactions, and tell a prospective buyer how well your business performed, and noted its last several quarters of computer sales and payroll. These numbers, although eye catching, are really only used for the purest financial purposes. Often these figures are more related to the “feel good” aspects of the process.

While it may seem like a great asset to have these numbers, they in fact do not take into account the likelihood of economic upheaval in the area your business operates. If the location you’re operating in is seriously threatened by local competition, or if the local economy takes a downturn, these factors will have a profound impact on cash flow and your ability to retain assets for a purchase.

Each year there are more businesses listed in the expanded version of the DOL (Department of Labor andducers) (Energy), and yet at some point the buyers will not learned about the fundamentals that drive a business to value. The good news is that these fundamentals give you a solid advantage when it comes time to sell.

Credit worthiness of business

If you’re selling a business for both the right price and the right terms, the truth is that the financing will have to come from somewhere. If the bank refuses to lend the money, it may be because the business doesn’t make enough money. Even though this is not always the case, a good restaurant broker is more likely to try to find financing for your enterprise. Looking for a restaurant with 75% Credibility and Roadblocks? Make sure you have a solid credit history before you agree to an offer.

You may be able to use those few remaining dollars to pay down a large school debt or repair a speeding ticket or record a trip to a club or mall. Even if you decide not to add to the debt load, it might be enough to obtain a few other assets in the process. Documentation regarding this is key to formalizing any deal.


On this point, it helps to talk with a restaurant broker who’s not coming off as a stalker just to obtain what you need to close a deal. The most successful brokers are people you can trust, who genuinely want to see you succeed. If you are unable to obtain the proper information about his or her financial history, this topic becomes moot.

Your old boss’s attitude isn’t the issue here – its the banks’ poor credit decisions and their desire to be paid late that is.

Businesses don’t sell because they sell. While there are many variables within every business that will influence both the selling price and what your payment terms may be, you and the broker need to be able to reach a reached a working agreement. Otherwise, you’ve left your business exposed to the long-term effects of credit problems most of which might have been minimized.

Controlls a great deal about a business

There is often a great deal of turnover in key aspects of a business. You need to make sure you are prepared to replace these managers without jeopardizing the future of the establishment. This is growing more and more of a major issue as businesses scoff at the expense of promotional budgets and real significant expenses.

While it’s nice to have a manager and manager on-hand whom you can trust to do their job, if they aren’t, you need to know. Keep these hires moving, that they’re worth their salary, and give them the salary they deserve.

Devoid of this critical point, many businesses will go down for whatever reason. Owning your own business is more than just getting a license to operate.