Selling A Distressed Business

Surprisingly, selling a distressed business can be profitable and relatively straight-forward. There are individual buyers and firms that specialize in purchasing such businesses; these buyers tend to be opportunistic bargain hunters and are adept at getting more for their money. Therefore, there are some strategies that you should utilize in order to maximize profit from the sale of your distressed business.

First of all, you may want to enlist the help of a business broker who specializes in distressed sales as they may be able to sell your business quicker, more effectively and help broker a better deal for you. Whether you decide to use a broker or sell your business independently, it is imperative that you prepare your financial statements and identify potential buyers.

You must develop a realistic understanding of the value of your business, in order to sell it in the most profitable format – either as a whole, piecemeal or by liquidating part of it. Search for ways to reduce risk to the buyer, and emphasize the value of the business’s assets. Never underestimate the value of your customer base, as this is often the most significant asset of a business. Also focus on the worth of your inventory, intellectual property and FF&E. Review the areas of the business that require improvement and perform a cost–benefit analysis. If fixing an area of concern leads to a rapid raise in value that outweighs the cost of repair, you should certainly do it.

Finally, have a strategic plan in place in regards to the actual sale of your distressed business. It is often advisable to have a ‘time is money’ approach to the sale, as time spent waiting for a higher offer can ultimately lose you money. Nevertheless, always first examine the benefits and risks of taking a quick, lower offer over waiting to reach your anticipated selling price. You should also have a back-up plan in the event that your business does not sell – continue to manage the business, liquidate or declare bankruptcy.

Tips for Selling a Resale Franchise

At some point and time, all franchise owners will go through the process of selling their franchise. This can be a frustrating process, if you are unprepared and uninformed. Fortunately, the stress of this task can be greatly reduced by following a few simple guidelines.

Know the franchisor’s rules regarding resale

It’s important to keep your franchisor informed about your plans to sell the franchise from the beginning. Many franchisors have rules pertaining to the sale of a franchise, and criteria that the buyer must meet. Most franchisors will offer assistance in selling your franchise, and may also be aware of potential buyers interested in a specific territory.

Prepare for the sale

Be aware that some franchise sales require more detailed preparation than others. Ask your franchisor for specific advice about what you may need to do for the sale of your franchise. This may involve putting financial records in order, establishing the value of the franchise, setting a price, and notifying employees if necessary.

Understand the market, and the potential buyer

Having a basic understanding of the market before listing your franchise for sale is imperative. Use similar franchises that have sold recently for a baseline to determine what your franchise is worth.  Establish if the local economy is suitable for a quick sale, and verify if there are potential buyers in the area. Check with your franchisor about any specific qualifications that a buyer must meet (total capital investment, liquid capital requirement). To save time, know the type of buyer that you are looking for so that those with insufficient qualifications can be disregarded.

Market the franchise

There are many options for advertising your franchise for sale. Organize exposure for your franchise in the form of networking with people in the industry, and online and print advertising.  You may also choose to involve a business broker in the sale of your franchise. When it comes to a sales pitch, ensure you know the demographics of your market, answers to potential questions, and all about the franchise system for sale.

Provide assistance to the buyer

Ultimately, you might need to provide assistance to the buyer of your franchise. Help them complete their application with the franchisor. Include training or even working alongside the buyer for the first few months.

Financing Options For Buyers

In the face of major economic changes and challenges in the U.S. today, many people are getting in touch with their entrepreneurial inclinations and starting or buying a business.  However, in today’s economic climate, funding by traditional means has become much more difficult.  Luckily for the aspiring business owner, many other options exist.

Starting from the closest to home and working out, one option many find viable is to borrow from their own retirement account.  It may sound scary at first, but upon further reflection, it becomes easier to recognize this option as just a different way of investing for one’s future.  Rather than putting your money in a risky stock market, it can help in the purchase of a new business.  The business will give you the means to create a livelihood that will allow you to then invest in a more stable market in the future, and to eventually sell the business, thereby creating retirement funds when you are ready to retire.

Borrowing money from friends and family is another method that may at first feel risky, yet it is a common, time-tested way entrepreneurs gain access to the funds they require to start or buy a business.  A few rules of thumb can significantly decrease the risk and stress factors.  First, use discretion and common sense in selecting who of your loved ones you decide to approach.  Those who may be willing to help, but would put themselves in financial jeopardy are not good choices, and the relationship may be negatively impacted as a result.  There are places online where you can find appropriate contracts and lending/borrowing agreements.  Taking such measures, many would say especially with loved ones, is a great way to decrease risk.  Then, of course, acting with integrity to uphold your end of the agreement can also avoid potential damage to a meaningful relationship where money is involved.

Person to person lending, or social lending, is another way to completely bypass the involvement of traditional lending institutions, and facilitate one individual helping out another.  Plenty of information on this financing method is available online, which is how the deal is most often done, and may also be found under “peer-to-peer” lending.

Finally, borrowing from the seller is a financing method increasing in popularity.  In fact, many sellers are finding that the sale just won’t go through unless they are willing to finance at least a portion of it.  The buyer generally agrees to pay back the seller with interest over a three to five year period.

As you can see, options beyond working within the limited means of traditional lending institutions do exist.  However, there is no reason not to hit them up too while you are on the search for financing in the process of the exciting endeavor of launching your own business.