Sell your business with Capital Commercial Business Sales

Anybody can list a business for sale, but very few brokers or agents can successfully sell businesses.

It's well-documented that less than 20% of businesses that go to market sell.  Our goal as your seller representative is to achieve the very best result from the market.

Most of our clients focus on three primary results:

  1. Largest amount of money
  2. Quickest possible timeframe
  3. Minimal level of stress

The business-for-sale market has been a buyer's market for a sustained period. A quick scan of any active business-for-sale website will quickly demonstrate that very few businesses promoted for sale are placed under offer, and very few are ever sold.

Our sales systems and processes are built on our core philosophies:

  • Our job as the seller's representative is to create real or perceived competition between buyers to achieve the very best price and sale terms from the market.
  • Information is critical in converting buyer-led enquiries to offers and ultimately exchanging contracts for sale.
  • Follow-up and feedback are essential so the seller can make informed and educated decisions about the sales terms and conditions required to achieve an unconditional sale.

There are many reasons you should consider listing and selling with Capital Commercial Business Sales, including the fact that we have sold more businesses than any other broker or brokerage in Canberra and can produce the results to prove it.

At Capital Commercial Business Sales, we have developed two different sales processes for our clients. Our full-service model with our unique high-low fee structure enables you to select the fee/commission at the end of the sale based on the end result and our Market-to-Sell program, where we work as consultants for you, and you only pay for the services that you need and require.

If you are considering selling your business, we encourage you to make contact so we can meet face to face at our city-based office and discuss the sale of your business.

 

Frank Walmsley
Principal Business Broker
Capital Commercial Business Sales

Seller Frequently Asked Questions

Let's assume an agreement is reached between buyer and seller and the key terms listed below have been finalised:-

  • Sale price and any seller financing agreements
  • Stock value and financing agreements
  • Handover, what will happen
  • Exclusion provisions applying to the seller
  • Lease assignment and/or property purchase
  • Franchise agreement terms
  • Ongoing assistance provided by the seller
  • Assignment of values

Once the buyer has paid a holding deposit, we will then create the sales advice, which we send to the solicitors.

The sales advice is not the contract, it is a summary of the keys terms that the lawyers will refer to, to create the contract. The business for sale contract is customarily-prepared by the seller's solicitor after the agent sends the sales advice to both.

Of course, if you’re looking to sell, it's crucial to understand whether the current BFS market favours those wanting to buy a business, or those hoping to sell a business.

And just as with the property market, everyone seems to have an opinion about the state of the BFS market - from accountants, brokers and bankers to the owners and sellers themselves.

So what do we think? Capital Commercial’s Business Sales Advisor Frank Walmsley has this to say:

"My personal opinion is that since the GFC and the corresponding collapse of bank funding for business purchases, the BFS market in Canberra has been a buyer market."

There is no verifiable data that we can refer to that relates to the Australian or Canberra market. In reviewing the main 10 business for sale websites in January 2016 we determined that of the 386 listings for sale only 5 or less than 2% were under offer.

Andrew Cagnetta, the Chairman of the International Business Brokers Association - the world's largest network of business brokers  - states that less than 20% of the business that go to market actually sell.

Source: https://www.youtube.com/watch?v=uXUUxZ7KMcU

Yes - we can and do sell businesses in a buyers’ market. In fact, while you may not think it, there are actually some advantages of selling in a buyer’s market.

Examples:

  • Most business sale listings are overpriced or incorrectly positioned
  • Sellers tend to be underprepared for the sale process
  • Novice or inexperienced agents don't know how to prepare, market or finalise the sale

As a result, when a well-presented, effectively-marketed business that is correctly priced comes to market, you can imagine how attractive it will look compared to those overpriced and poorly presented listings.

Yes. We work with several local business finance brokers including the big four banks and independent brokers.

With the permission of the seller, we can also arrange pre-approval with our preferred brokers. We call this our LVR letter, which included in the Business Information Package. For an example LVR letter, ask your broker.

It's important to recognize that preparing your business for sale is equally as important as marketing your business for sale.

What is the point of generating buyers leads through marketing and advertising if you don't have the sufficient, and correctly presented information to convert those buyers?

Proper business sale preparation increases the buyer lead conversion ratios.

Most sellers should plan to invest between 1-2% of the value of their business to generate buyers and prepare the business for sale. 

What you get for that investment?

  • Preparation of the Business Information Package, document conversion and pre-sale co-ordination with lawyers, accountants, and third parties.
  • Advertising on nine buyer-driven websites
  • Accessing our database of 4000+ buyers

Please refer to our Question and Answer about excessive listing fees.

For the average business priced $250,000 in a conventional industry, an investment of $5k or $10k+ upfront would be very excessive.

Many of the brokers that propose this type of investment claim to target overseas business skills migrants through business sale magazines, which they own.

The Australian Institute of Business Brokers (AIBB) has complained to various state and federal government agencies about the practice of misleading sellers to list with excessive upfront fees with unrealistic and misleading promises.  Read here:  http://www.aibb.org.au/press_release.php?Id=23

The average investment by a successful seller client with Capital Commercial Business Sales was $2650 in 2015.

A snapshot of what sellers received;

  • preparing the business for sale
  • listing on 9 buyer-driven websites
  • access a local database of 4000+ buyers

 

If you accept the principle that the business sales terms that you ultimately receive; money, conditions and value (yes that’s different to money) – will be determined by the pool of buyers that you are negotiating with, and selling to.

We suggest that the question should be repositioned from "what is it worth?", to "how do we get all that its worth?"

There are different methods use the world over to value businesses. These include – but are not confined to:

  • Return on investment (ROI)
  • Multiple of earnings
  • Comparative market value (recent comparable sales)
  • Asset replacement value

Different industries, business locations and business models have significant impacts on the market value of your business. Therefore, it's important that you speak with an expert that has experience in selling businesses in the geographic and sectors that you are proposing to sell in.

If you require a business valuation for partnership, insurance or planning purposes, we can refer to several practicing business valuers.

The short answer is no, GST doesn’t apply to the sale, if the business is being sold as a going concern.

The sale of a going concern occurs when:

  • a business is sold, and that sale includes all of the things that are necessary for the business to continue operating, and
  • the business is carried on, up until the day of sale.

Also the purchaser will need to be registered, and there will need to be agreement, ideally in writing, between seller and buyer that the sales is a going concern.

Before proceeding with a purchase speak with your legal advisor to determine if your business is a going concern.

Fee for service

We believe the way in which our fee is determined will have an impact on your end result. That’s why we have developed a minimum-maximum fee structure for our clients.

Here’s how it works:

Before we start preparing your business for sale, you will meet with the broker to determine the fee range structure – that is, a minimum fee and a maximum fee.

This range will be written into the agency agreement, giving you the exclusive power to determine any fee within that range at the time of sale.

If you feel we did not deliver a service to an acceptable standard, you are free to pay only the minimum fee. If, on the other hand, we exceeded your expectations, you may choose to reward our efforts with a higher fee, or even the maximum.

The fee you choose will represent value to you as a customer, and the prospect of a higher fee will give our team the incentive to deliver outstanding service and exceptional results.

An example:

We agree to a minimum fee of $10,000 inc GST and a maximum fee of $18,000 inc GST. The business sells for less than you were hoping. You were very happy with the follow-up and communication.

You select the fee after exchange and before settlement of $14,000 inc GST.

Why do we advocate this fee structure?

If the customer controls, the end fee or commission it keeps the agent accountable.

If there is significant difference between the minimum fee and maximum fee it provides real incentive for the broker to get the best result and provide the best service.

In contrast to a flat fee or fixed percentage method where there is no control for the client or incentive for the broker.

Disclosed Marketing Campaign

In a disclosed marketing campaign, some or all of the following are disclosed through the marketing process:

  • Name of the business
  • Photos and video of the business
  • Location of the business.

 

Advantages of a disclosed marketing campaign Disadvantages of a disclosed marketing campaign
Greater number of enquires from qualified buyers, as the seller is perceived to be genuinely keen to engage in the sales process. Staff, suppliers and customers may become aware that the business is for sale. (The impact on these groups can be addressed prior to marketing, using various key processes.)
Additional customers that could potentially become buyers are more likely to become aware that the business is for sale. Buyers may approach the business directly.
If the business has strong brand value, this increases the likelihood of enquiries from passive buyers who may otherwise not have enquired. Competitors are aware that the business is for sale and may approach staff and/or customers.
Provides a call to action for competitors that might not otherwise be in the market to buy. Buyers who have a negative view of the business won’t enquire.

 

Undisclosed Marketing Campaign

As you may have guessed, in an undisclosed marketing campaign, the name, location and images of the business are not disclosed to the general public through the marketing process.

 

Advantages of an undisclosed marketing campaign Disadvantages of an undisclosed marketing campaign
Ability to maintain a level of secrecy in regards to staff. Generally a lower number of buyers overall.
All enquires are made through a broker or seller representative rather than directly from buyers. Competitors that may become buyers are unaware of the business being actively marketed for sale.
Buyers who have a negative view of the business won’t be put off from enquiring. The brand value of the business cannot be leveraged, even if it is strong.

 

Disclosed or Undisclosed?

In November 2015, we researched which type of marketing campaigns were being undertaken by the businesses for sale in Canberra at the time.

Of the 237 businesses for sale in Canberra, 82% were undisclosed listings while only 18% were disclosed.

Capital Commercial Business Sales and principal broker Frank Walmsley have sold 135+ businesses in Canberra alone.

We can provide the names of our recent sales, or you can scroll below to see the details of some of the businesses we have sold (press the load more button) we have listed about 80+ here)

We have expertise in the franchise, independent business sales and have the systems and process to sell any small to medium sized enterprise in Canberra.  

Happy to provide the phone numbers of my last 15 sellers.

Wondering how we convert initial buyer interest into a sales offer? Here’s a quick overview of the stages in our process:

Stage 1: Potential buyers enquire through websites, direct email, referral from our database, or by phone. All enquires are recorded in our central buyer database and an email is automatically generated to let you know who has enquired.

Stage 2: Once we’ve ensured the potential buyer has signed the deed of confidentiality, we’ll release our e-dossier providing details of earnings or the PEBITDA report, as well as the Business Information Package (BIP) created for your business.

Stage 3: Within 3 working days, we’ll call the potential buyer to discuss the BIP.  At this point, the buyer will generally be able to make a high level decision on whether they wish to proceed. If not, we’ll record their feedback and provide this to you via email in our Buyer Feedback Report.

Stage 4: If required, we’ll arrange an inspection for the buyer - in many of cases, the buyer is taken through the business by the seller. If the buyer has further questions, we’ll either answer these directly if we have the information, or record them in our Question & Answer system, which will generate an information request via email.

Stage 5: Once all primary questions have been answered, we’ll take offers on behalf of the seller. There is generally a phase of negotiation. Once the terms have been agreed, we will coordinate the contracts for sale and forward to the legal representatives of each party.

Stage 6: As most contracts for sale are subject to conditions such final due diligence, landlord acceptance, finance or franchisor approval, we will follow-up on the client’s behalf until the sale is finalised.

If generating buyers through marketing and database management is half of the story, then the other half of the story is the process of buyer or lead conversion.

Lead conversion in simple terms is the process of converting buyers that make an inquiry and inspect and receive information about your business into cash offers and ultimately contracts for sale.

It's one thing to list businesses for sale, and, believe it or not, many business brokers have a profitable model for doing just that, but selling that's an entirely different story.

Buyer conversion, from our experience, comes down to two main factors. Preparing and presenting the right information to buyers and the process of buyer follow-up.

At Capital Commercial Business Sales, we have a system for both buyer generation and buyer conversion.

The Business Information Package (BIP) is central to the purchaser conversion process. The BIP is a document that explains how the business operates and the results that it has achieved. We will create your BIP partnership with you and your third party advisors, such as accountants, lawyers, and bankers.

When buyers have been qualified and signed the confidentiality agreement, we will email them a PDF copy of the BIP.

Some agents call these documents Information Memorandums (IM). We feel that term is a bit outdated and anachronistic.

If you don't have an adequately prepared BIP or IM with appropriate source evidence such as financial statements and tax returns, earnings reports, property and equipment leases, and operational data.

The chances of selling are slim, and the chances of selling for a premium are almost impossible if you don't provide core financial and operational data.

When we meet to discuss the sale strategy, we can go through this paperwork.

In 2016 Capital Commercial Business Sales developed its Market to Sell program in response to the need to create a viable alternate option to the full fee-full service model.

Traditionally brokers would charge a sales commission of between 5% and 10% of the sale price in addition to an upfront fee.

We recognised that a lot of businesses priced under $100,000 wouldn't benefit from paying a broker $10k plus $2k-$3k upfront.

Our Market to Sell program allows you to list on nine buyer-driven websites, create a world-class information package, access our database of 6000+ buyers and have expert support, without having to pay commissions.

You simply invest $2750 upfront and then an agreed hourly rate (usually 5 hours in total) for the advice and support you require.

About 25% of our sellers now use this program.

To find out if your business is suited to and would benefit from using the Market to Sell program contact our team at sales@capitalcommercial.com.au or call 1300 793 690 or download the PDF below.

180520171645_Market_to_Sell_Program_Explained.pdf

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