Benchmark Business Group

Seller's Opportunity Zone

June 18, 2018



 
Most business owners ready to sell their business have an idea of how much money they would like a buyer to pay them for their business. While having a clear idea of the financial offer you'd be happiest with is important, there are several other dynamics to consider, ensuring the deal you strike with a buyer meets your needs, and theirs.

Understanding these dynamics ahead of time will enable you to establish a zone of opportunity in which you can assess the offers you receive. Your "zone" is the range between your ideal offer and the bottom line acceptable terms. As a seller, this gives you an Opportunity Zone in which you can confidently negotiate with a buyer.

For instance, you may want to sell your business and have no obligation to stay involved, while a buyer may want you to remain in the business for a period of time to help transition your customers and employee relationships. In this case, your Ideal Deal would include walking away from the closing table and never looking back, while your Bottom Line Deal might include working two weeks full time, then moving to be in a few days a week for another month. By establishing your Opportunity Zone you will proactively consider these factors ahead of time and be prepared to discuss them.

Dynamics that create your Opportunity Zone:

Financial:
The sale price of your business isn't the dollar amount you walk away with. The amount of money you keep is affected by other factors such as the costs of sale, owner carry-back (a loan from you to the buyer for part of the purchase price), income taxes, prepaid sales, and accounts payable and other liabilities. Talk with your business accountant well in advance of selling to understand the dynamics that will affect your walking away money.

Time and Personal Commitments:
Selling a business takes time, usually no shorter than six months. Buyers have their own set of needs that impact their ability to consummate a sale. Available cash, other acquisitions in the works, or working with a bank to get financing are all factors that affect timing. You may have a buyer that wants to delay the sale date to roll the sale into the next calendar year. While this may benefit the buyer, it may also affect you. Consider your desired timeline and work with your broker to discuss the elements that may affect the timing of your sale.

Consider the amount of time, and the length of time you will be available to answer questions, and provide expertise after the sale has taken place. If you expect you will need to be heavily involved after the sale, you might consider a flat fee or a salary that reimburses you for your time. Remember to wear your Buyer's Glasses as you consider what the business and new owner may need from you. Your agreement with a buyer should clearly set the expectations around your involvement and accessibility after the sale.

Establishing your Ideal Deal and your Bottom Line Deal in advance of negotiating with buyers will allow you to be more confident during deal negotiations. As you assess offers, you can consider how well they fit within your Opportunity Zone.

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