Why 2013 Saw a Rise in Small Business Sales in California

If you are contemplating selling your business in the state of California, it may interest you to know that business sales for 2013 were up from 2012. Selling a business is a big and sometimes difficult decision. Even so, many business owners find this recent increase in sales to be quite comforting, especially if they want some security to know that there is a stronger market out there for selling. In fact, many potential buyers hope that these positive numbers will induce more businesses on the fence about listing their business will knowing that the market is in a healthier place for business sales in the state.

Small Business Sales Increase in California

The rate of small business sale has increased throughout the Golden State. In 2012, reports show that 14,368 small business operations were sold in total. In 2013, that number grew to 14,764 completed sale transactions. Of course, experts suggest that the increase may not be felt as substantially in some counties as others, which is typically to be expected, but that overall these good numbers reflect a new trend in upward sales that is likely to continue in 2014. Many factors appear to be linked to the increase, but one of the main reasons why these sales are going through is because buyers have better access to funding sources.

Sales in Large Counties Mixed

Some of California’s largest counties may not be feeling the increase yet, but that likelihood could change as more California businesses may be hitting the market for sale in 2014. Certainly, large counties like Los Angeles County are hoping to see more sales as a thriving business-for-sale market is a strong indication of an overall strong economy. Increased business sales are linked to better job growth too. The increase is doubly important in light of the fact that the state was losing businesses at a rate of about five percent.

What is Triggering the Rise?

While better access to money is at the heart of the increase, there may be other factors involved. For instance, experts believe that an improving house market as well as an improved stock market may also be supporting the increase in California business sales. Many small business owners also appeared to be waiting to list their business for sale in California until the market began to shape up.

Do You Have a California Business for Sale or Want to Buy One?

Increases or decreases aside, it can help the process of buying and selling to contract with a business broker. Their services can help viable buyers and sellers to sync up more quickly and effectively. Business brokers stay current with the sale market and understand the ins and outs of the buying and selling process. Their expertise can certainly impact the nature of the sale and the time frame in which a sale can be made. Contact a business broker if you plan to sell your California business or hope to purchase one.

Vested Business Brokers

Hiring the expertise of a vested business broker is a good strategy, especially when doing business. If you are thinking of buying or selling your business, the foremost thought on your mind is, of course, how you will be able to optimize your sale or purchase. Getting the services of a reliable and knowledgeable vested business broker can make a huge difference.

Vested business brokers act as the middlemen between buyers and sellers. They may have ready resources, such as a long list of clientele who are ready to make purchases or people who are itching to sell businesses or properties. Vested business brokers may also be in contact with a wider network that, in turn, can put you in touch with more possible buyers and sellers.

Aside from these perks, the services of vested business brokers usually include some form of promotion, like advertisements and publicity, which can speed up the sale or purchase of your item.

Business deals, such as the buying and selling of a business or property, usually includes a fair amount of paper work and can take up a lot of your time. If you do not want to be bothered by the technical details, then you can hire a professional to address your needs. Vested business brokers can take care of everything from setting up meetings, making credit inquiries and even doing your paperwork. With these people at the helm, all you need to worry about is getting a fair deal.

The buying and selling process can be complicated. Many of the business dealings involving buying and selling can be taxing. That is why you need someone reliable who will take care of your assets and your money. You want someone who is smart enough to know a good deal when he stumbles upon one and turns away from a bad deal as soon as the warning signs flash.

Business Brokers – How to Choose the Right One

The vast majority of small businesses are sold without the assistance of business brokers.

But if you do decide the hire a broker, here are some suggestions on how to pick the right one and how to structure the agreement in your favor.

What Business Is The Broker Actually In?

In many states there is no training or certification needed to become a business broker. In other states, brokers are required to hold a real estate license.

In these states it’s common to find real estate agents that do business brokering as a side business. If you deal with a broker who is also a real estate agent, make sure that being a business broker is more than just his hobby.

You will pay a pretty penny for the broker’s expertise and experience – you should make sure they have that experience when it comes to selling businesses and not just experience selling houses.

Questions To Ask

If you hire a broker you will be working with them closely for months to come; they will have access to your most confidential business records; the amount of money you put in your pocket at closing will be influenced heavily by the quality of work they do.

Therefore, you absolutely must check them out.

Here are some questions you should ask any prospective broker before hiring him:

1. How long have you been a broker?
2. Have you ever owned a business?
3. How many businesses similar to mine have you helped sell?
4. Can I see a blank version of your Listing Agreement?
5. What percentage of you income comes from brokering and how much from real estate (If applicable)

Ask them to provide you with references from previous clients. Then, I suggest you do something very unusual: Actually call the broker’s references!
I know a lot of people ask for references just to see how the person will react when asked (and to see if they actuality have any). But you can learn a lot about the broker’s reliability and professionalism by talking to people who dealt with that broker when they were in the exact same spot you are in.

Business Broker Fees

There are two benefits a broker can provide the business seller. First, he can locate potential buyers while maintaining the seller’s confidentiality. And second, a broker will qualify these potential business buyers so the seller saves time by not having to deal with weak prospects.

The big negative of dealing with a business broker is his fee, which averages 10-12% of the sale price. This fee is charged to the seller.

There is also a minimum fee. A very small business will pay a flat amount, typically $8-$10,000, instead of the commission. For a business worth $50,000 this minimum fee actually works out to be a higher percentage than the 10-12% industry average. But as a matter of practice, brokers usually won’t be interested in your business unless the asking price is above $100,000.

These fees are the reason most business owners choose to sell their business themselves and rely on their lawyers and accountants for the professional assistance they need.

The Broker Agreement

If you decide to use a broker you’ll be asked to sign a broker agreement which will detail the his fees. If possible, have your agreement include the following clauses:

Timing of Payments – Have it written into the agreement that the broker’s fee will be paid at the time you receive the purchase price – not at the time the sale is closed. This way, if you finance part of the sale price over a number of years, you pay the business broker as you get the money, not all up front.

Length Of Agreement – Your listing agreement should be for a limited time. If the broker locates the buyer within that time he gets paid. Be careful of lengthy agreements that lock you in with one business broker for more than 6 months. If he doesn’t produce, you want to be able to try other options. A 6 month business broker agreement is the longest you should allow. However, because selling a business can be a lengthy process, 3 months is usually too little time for the broker to find the right buyer. Try to settle on something between 3 and 6 months. If after six months, you haven’t closed the deal but you think the broker has done a good job, you’re always free to extend the agreement. But you want to be free to decide on an extension 6 months from now, not today.

Broker’s Guarantee – Include a paragraph stating that if you find the buyer, you don’t have to pay the commission. Without this clause, the broker is usually paid no matter who locates the buyer. Before signing any listing agreement, it is best to have your attorney review it to make sure your interests are protected.