Selling Your Business Online: A Q&A with Mike Handelsman of BizBuySell
Many business owners looking to sell their business don’t realize they can use the internet to make the selling process go more smoothly. Online business-for-sale marketplaces allow sellers to reach a large number of potential buyers and provide resources for owners considering putting their business up for sale.
Mike Handelsman, general manager of San Francisco-based BizBuySell, the internet’s largest business-for-sale marketplace, answers sellers’ questions about listing a business for sale online.
Q: What should a seller do to prepare for listing a business for sale online?
A: Allowing yourself enough time is key. Too often, people try to rush their business to market and run into complications during the selling process as a result. Allow several months between making the decision to sell and making the business available online. During this time, figure out your company’s financial situation so that you can present this information to prospective buyers.
Once you put the business up for sale, have all of the information relating to potential growth and revenue, past performance and business costs on hand. Putting the time and effort into preparing these figures in advance will tell potential buyers that you know what you’re doing and give them more confidence in you.
Q: How can sellers determine a fair asking price for a particular business when using an online marketplace?
A: Online marketplaces often provide tools for determining a fair, standard selling price based on comparable businesses, geographic area, gross income and cash flow.
For example, if you’re listing a restaurant, you could access a report that breaks down pricing information for that specific type of business and its location. A full-service restaurant might be priced at 33 percent of annual sales, as opposed to 40 to 50 percent for a fast food restaurant. More specifically, a fast food restaurant specializing in hamburgers might sell for 35 percent of annual sales, while a pizza restaurant would generally sell for around 30 percent.
Also, our data indicate that restaurants typically sell for an average of 85 percent of sellers’ original asking prices. So if you’re a restaurant owner wanting to sell your business for $200,000, you may want to ask for $235,000.
BizBuySell offers a Valuation Report which uses real data from sales transactions to help you determine a fair asking price. Learn more about the report here.
Q: Are certain types of businesses easier to sell online than others?
A: Our data shows that the largest category of business listings are restaurants, so those are the type most frequently purchased. Another popular category is service establishments, including auto repair shops and dry cleaners.
However, people have listed and sold a variety of businesses, from web design firms to furniture manufacturers.
Q: Are business in certain geographic areas bought and sold online more frequently?
A: Yes, last year Florida had the most business listings on our site, at nearly 15 percent, followed by California, New York, Texas, New Jersey and Arizona.
Q: What tips do you have for creating a business-for-sale listing?
A: Providing the right information is imperative. There’s a fine line between providing so few details that prospects don’t take notice and providing so many that your business’ confidentiality is compromised.
The key is providing the most information possible without giving away the identity of the business. It’s important to give viewers an idea of the general location of the business, but don’t post the street address, phone number or address in the listing. Instead, create a separate e-mail address and phone number for inquiries from potential buyers. If you have to provide further detail, make the recipient sign a nondisclosure agreement.
It sometimes helps to tell potential buyers why you’re selling the business. If you’re honest, people tend to be less skeptical.
Once you list your business, you might find that certain questions come up repeatedly in inquiries. This can serve as a guide for what you should add to your listing if ongoing editing is possible.
Q: How can a seller tell a serious buyer from one who isn’t likely to follow through?
A: The best way to pick out serious prospects from the rest is to ask potential buyers questions about how long they have planned on buying, how they plan on financing the business and how much money they have for a down payment. This kind of informal interview will allow you to determine whether the prospect is worth pursuing.
On the other hand, sellers also should be sure to follow through. We hear from many buyers who say they’re interested in a specific business listed, but can’t get the seller to communicate.
Using an online business-for-sale marketplace is a two-way street. Successful transactions require open communication and attention to detail from both buyers and sellers.
About the Author
Mike Handelsman is Group General Manager for BizBuySell.com and BizQuest.com, the Internet’s two largest and most heavily trafficked business-for-sale marketplaces. Both sites feature business valuation tools that draw from the largest databases of sales comparables for recently sold small businesses and include two of the industry’s leading franchise directories. Together, BizBuySell and BizQuest list more than 75,000 businesses for sale at any time and have over 975,000 monthly visits.
Prior to his online experience, Mr. Handelsman began his career in brand management with Procter & Gamble, and also worked as a Management Consultant with McKinsey & Company in Chicago and San Francisco. For the past 15 years, he has had extensive experience dealing directly with start-ups and early-stage businesses. Mr. Handelsman is a graduate of Duke University, and holds a MBA from the Harvard Business School.