California Business for Sale

Business Sellers - No Need to Pay Up Front Fees

2011-08-22T13:22:00.000-07:00

There are two types of business brokerage firms. Those that charge up front fees and those that work on contingency fee basis.

Firms that represent owners of lower mid-market size companies (under $100MM in revenue) in the sale of their businesses fall into two camps.

The first group and the subject of this article charges the potential business seller substantial ($30-60,000) fees at the beginning of the process in addition to a percentage of the sale price upon closing. These fees are for “packaging” the business, they claim, so that it can be presented to buyers in the best possible light, thereby supposedly “guaranteeing” a sale at a premium price. These fees, while sometimes credited against future commission owed, are otherwise non-refundable and if the business doesn’t sell then the money spent is wasted. This group usually targets business owners via a mailing which invites him or her to a seminar, usually well-crafted to pre-sell the packaging fee after which a salesperson will do the necessary follow-up.

The gross margins for the packaging of a business is high (approximately the wholesale cost of only a few thousand dollars) so the selling of these packages becomes an end in itself while there is a possibility of a future commission should the business actually sell. These firms put most of their efforts into the marketing and sale of packages, a much more certain revenue model. The possibility of a sale is made even more remote since in the process of selling the package the owner is often led to believe his business is worth more than the market value.

These types of firms have been around for decades and while they have been the subject of class action suits (some business owners got some money back), cease and desist orders, etc. they simply close shop and re-form under a new label often with identical staff and M.O. It is a durable business model because the usual procedures that a purchaser of a large ticket service uses is to “ask for references”. This is headed off by claims of confidentiality. Although it would be reasonable to assume that if a firm has sold 100’s of businesses that there would be at least some happy clients that are accessible to the prospect for verification.

The other type of broker does not charge an up-front fee and must sell companies on a regular basis to stay in business. The business owner is therefore much more likely to complete a sale. BTI Group does not charge up-front fees. Please call today for a no-obligation meeting.

Business Buyers - Why pre-qualifying is important?

2011-07-09T15:56:00.000-07:00

As a business buyer, it is in the buyer's best interest to be pre-qualified to buy a business. Pre-qualification leads to an efficient search. Without qualification most buyer's will look at businesses they are not qualified to buy and will eventually tire of the search then quit. Alternatively.

When a buyer works with a experienced broker, that broker should only show those businesses for which the buyer qualifies. In addition by being pre-qualified with a broker, the buyer will often see opportunities before they are available to the general market. Qualification ensures that pre-qualified buyers are the first to know about opportunities as soon as they become available. It is quite common for the best businesses to receive multiple offers soon after they go live on the brokers internal system. By pre-qualifying with J. Alex Arce, buyers have an edge over other non-qualified buyers.

How to Qualify?
1. Experience: Submit your resume or a summary of business experience. I need to know that you have the basic skills necessary to operate the business you are reviewing. The better I know you, the better I can help you with your business search and ultimate purchase decision. My process is designed to achieve maximum effectiveness.

2. Financial Capabilities: Submit your financial qualifications. Part of the qualification process is verifying financial ability to purchase a business. The best way to do this is to review the buyers personal balance sheet. Why a balance sheet is needed? - When I sign a representation agreement with seller client, I agree to maintaining confidentiality about the sale of their business and to only disclose confidential information to properly qualified all buyers. Also by knowing the buyer's financial capabilities, I may be able to place them into other great opportunities.

Some buyer's are reluctant to share their financial profiles for confidentiality reasons. As a license broker (01388900) in the State of California, I have a fiduciary duty to deal with all buyers and sellers honestly and fairly. Part of our stock in trade is confidentiality, I agree to keep your information in strict confidence. My policy is designed to maintain confidentiality and to achieve maximum efficiency and effectiveness.

3. Confidentiality Agreement - Part of the qualification process is signing a confidentiality agreement prior to reviewing any confidential information about companies I represent. There is a great deal of value in keeping the sale of a business confidential. Failure to maintain confidentiality could affect vendor and employee relations and ultimately the profitability of the business you seek to purchase. The seller will be sharing confidential information about their business and they expect buyers to maintain confidentiality. Buyers should be prepared to sign a standard confidentiality agreement.

To begin the qualification process contact Alex Arce directly at www.alexarcecbi.com

What will it take to sell your business or company?

2011-06-30T11:14:00.000-07:00

Good companies sell at consistent earnings multiples in any market. The key is to properly package the company, develop a dedicated list of potential buyers, create a competitive bidding process for the company, and negotiate a fair deal between the parties. This is where my firm, BTI Group, excels and where you profit from our experience.

Here are 5 key factors that must exist to complete the transaction in the most efficient manner.

Proper Preparation - Have a realistic expectation of value. Get your business and personal items in order. We create a marketing package that presents the company in its best light.

Right Timing - A company will be sold for its best value when its performance is better than its peer's performance. Or when positive historical trends coincide with a positive near-term outlook. We will help you determine the right time.

Seller Motivation - Seller commitment to the selling process is absolutely critical to negotiating and closing a deal with the right buyer. Enthusiasm goes along way.

Multi-Channel Marketing Approach - The best buyer is found by using various creative marketing channels. Our proven channels and consistent follow-up ensure you get access to the right buyers.

Confidential Process - Maintains company value and allows for the creation of a competitive bidding process for your business. When buyers compete, you win.