{"id":544389,"date":"2020-10-20T19:31:43","date_gmt":"2020-10-20T23:31:43","guid":{"rendered":"https:\/\/mabusinessadvisors.com\/reno\/blog\/2020\/10\/20\/price-or-terms-the-structure-of-the-deal-when-selling-a-business\/"},"modified":"2020-10-20T19:31:43","modified_gmt":"2020-10-20T23:31:43","slug":"price-or-terms-the-structure-of-the-deal-when-selling-a-business","status":"publish","type":"post","link":"https:\/\/mabusinessadvisors.com\/reno\/blog\/2020\/10\/20\/price-or-terms-the-structure-of-the-deal-when-selling-a-business\/","title":{"rendered":"Price or Terms: The Structure of the Deal When Selling a Business"},"content":{"rendered":"<div>\n<div>\n<p>An old saying in negotiating the sale of a business goes like this: <em>The buyer says to the seller, &ldquo;You name the price, and I get to name the terms.&rdquo; <\/em><\/p>\n<p>Another saying used to explain the actual value of the term full price: <em>&ldquo;If we could find you a business that nets you $500,000 a year after debt service, and you could buy it for $100 down, would you really care what the full price was?&rdquo;<\/em><\/p>\n<p>It seems that everyone is concerned only about full price.&nbsp; And yet, the price is just part of the equation.&nbsp; If a seller is willing to accept a relatively small down payment and carry the balance, a higher price can be achieved.&nbsp; On the other hand, the more cash the seller wants up front, the lower the price. If the seller demands all cash, barring some form of outside financing, the price lowers &ndash; and, in most cases, the chance of selling decreases as well.&nbsp; Even in cases where outside financing is used, such as through SBA, etc., the lender will do everything possible to ensure that the price makes sense.<\/p>\n<p>Sellers should understand that both what they hope to accomplish in the sale of their business and the structure of the actual sale can dramatically influence the asking price.&nbsp; Price is obviously important, but other factors may be even more important.&nbsp; For example, consider a seller with health issues who needs to sell as quickly as possible.&nbsp; In his case, timing becomes more essential than price.&nbsp; Another seller may place more importance on his or her business remaining in the community.&nbsp; In that case, finding a buyer who will not move the business may supersede price or certainly influence it.<\/p>\n<p>Likewise, the structure of the deal can both influence price and be a more significant factor than price to either the buyer or the seller.&nbsp; The structure can dictate how much cash the seller receives up front, which may be more important than price for some sellers.&nbsp; On the other hand, sellers should also be aware how much the interest on their carry-back can add up to.&nbsp; If cash is not an immediate concern, monthly payments with an above-average interest rate may be enticing.<\/p>\n<p>These examples all demonstrate the importance of a M&amp;A Advisor \/ Business Broker professional to sit down with the seller prior to recommending a go-to-market price.&nbsp; During this meeting, the advisor should find out what is really important to the seller, as these issues may have a direct bearing on the price.<\/p>\n<p>Sellers should look at the following factors and rank them according to importance on a scale of one to five, with five being extremely important.<\/p>\n<p>&bull;&nbsp;&nbsp;&nbsp; Buyer Qualifications<br \/>\n&bull;&nbsp; &nbsp; Selling Price<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Amount of Cash Involved<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Financing<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Confidentiality<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Commission\/Selling Fees<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Closing Costs<br \/>\n&bull;&nbsp; &nbsp; How the Business is Shown<br \/>\n&bull;&nbsp;&nbsp;&nbsp; Advertising\/Marketing<br \/>\n&bull;&nbsp;&nbsp;&nbsp; How a New Owner Continues the Business<\/p>\n<p>By ranking these items and discussing them with a professional M&amp;A Advisor \/ Business Broker, a seller can receive helpful advice on price, terms, and structuring the sale.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>An old saying in negotiating the sale of a business goes like this: The buyer says to the seller, &ldquo;You name the price, and I get to name the terms.&rdquo; Another saying used to explain the actual value of the term full price: &ldquo;If we could find you a business that nets you $500,000 a [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":544390,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[9,96],"tags":[],"class_list":["post-544389","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-seller-articles","category-selling-a-business","entry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - 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