When the time has come to sell your business, you may find yourself questioning where to start. Working with a professional business broker can be a big help in helping you navigate the sale of your business. Once you have decided to sell your business there are several different structures to consider.

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Lump sum

The most preferred way for business owners to sell their business is by receiving a lump sum. This is when the buyer pays for the business in its entirety at one time and usually in cash. This is often the easiest way to sell your business because once you receive the money and sign the paperwork the deal is done. 

Payment through a financing institution

Another common form of payment in the sale of a business is through a financing institution that allows the buyer to place a down payment for the purchase and make installments, with interest, over an agreed-upon period of time until it is paid off. Depending on the size of the deal and available capital, buyers may present offers that include SBA financing. If third-party financing isn’t an option, you may be approached with a seller-financed deal. In this case, like the bank, you will receive a down payment at the closing of the sale followed by payments over a period of time until the balance is paid in full.

Earn-out

When selling your business, you can also get creative. These creative ways of selling your business may include an earn-out or a long-term partnership. A few examples of when an earn-out may take place are when a buyer and a seller can’t reach an agreement on the price, there are growth opportunities that may occur in the near future, long-term contracts, or unpredictable trends in the industry. When a buyer and seller agree on an earn-out the seller receives payments from the buyer at certain points when agreed-upon performance targets are met.

Partnerships

A long-term partnership however is different in the sale structure. A buyer will acquire a certain percentage of the business, usually majority ownership, and the seller will retain the remaining percentage. If you are a co-owner in the business, it is important to have an operating agreement and fully understand the roles, obligations, and rights of all parties.

Working with a professional business broker is the best way to help you navigate the sale of your business and help you get the right price. Brokers will help you with every step of your selling journey from getting your books in order to intermediate between the buyer and the seller.

 

Author: Brian Bond is the principal of Strategic Business Brokers Group, a brokerage firm in Scottsdale, Arizona that has helped business owners sell their businesses across Arizona. Bond has been named “Broker of the Year” by the Arizona Business Broker Association.