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Frequently Asked Questions by Sellers

 

Commission Agreement - Is this some type of Sole or Exclusive Mandate ?

I have five franchise areas to sell.   Do I list them here ?

I need to determine a selling price ?   Who can help ?

Who receives the enquiries ?   And what are my obligations ?

What level of enquiries should I expect ?

Confidentiality is absolutely critical.   Can I be sure of this ?

What is “Supression Status” on a listing ?

How much info should I disclose in the public listing ?

What's to ROI (Return on Investment) and where do I enter it ?

I need to change price and details.   How do I do that ?

None of the buyers have finance ?   What can I do about this ?

Who has made enquiries so far ?   I need a list to check against.

I think I've sold the business. What's next ?

It's all over. Done and sold! I'm paid, but what do I pay Biz.for.Sale ?

 
Regarding the Commission Agreement.......
    Is this some type of Sole or Exclusive Mandate ?

Not at all.! You should rather view this as an interactive form of advertising the sale of your business. The real differences between regular advertising and Biz.for.Sale advertising is that we provide a secure and anonymous way for the prospective buyer to contact you directly. And instead of you having advertising fees to pay; if there's no sale via our website then there's no cost to you. But if you do sell through the website, then the commission liability is due and payable. We are not business brokers  -  we provide an advertising and introduction service.

Business brokers and other agents make use of this service as they consider it a cost effective method of national (and international) advertising which provides potential buyers that they may not be able to reach. The old formulas that suggested you advertise locally for the most likely buyers do not necessarily apply today. Many businesses, for example, are sold to South Africans returning from abroad - and the negotiations commence via this website.

Remember that, in terms of the Commission Agreement, you are only liable for the commission payment if a sale is concluded with a party that discovered you via the Biz.for.Sale website listing or made contact with you through the website.

 
I have five franchise areas to sell.   Do I list them here ?

Maybe. Maybe not. The Biz.for.Sale website is split into two sections, Businesses for Sale and Franchising SA (Business Opportunities).

Businesses for Sale are just that. Established, running businesses with a trading history (possibly dormant) which are being offered for resale.

Franchising SA (Business Opportunities) is where the franchisors (who own the brand) promote the sales of new (to be established) outlets which will be fresh start-ups. They are not established businesses.

It is possible that you are a franchisor and have repurchased, or acquired by default, five established franchise outlets and need to find take-over operators. In those circumstances you should list in the Businesses for Sale section.

Remember that visitors to this website who are looking for a new startup in your sector would be looking in the Franchising SA (Business Opportunities) section and would miss your offering if it was listed incorrectly in the Businesses for Sale section.

You could be the franchisor and are selling the master franchise for South Africa. In other words you would own the brand and the rights to sell and create new franchises. In that case you would list here in the Businesses for Sale section.

 
I need to determine a selling price ?   Who can help ?

For most sellers, this is the BIG QUESTION! Too low and you will have a very quick sale and a long remorse period. Too high and the business may go stale on the market causing other price issues and a lower price expectation.

You would be best advised to use the services of an experienced accountant or business broker to assist you in this regard, but there are resources available to get you up to speed with terminology and the different methods and logic used to establish a selling price.

Read our article Valuing Your Business and Setting a Selling Price on this website.

Then do your own research by Googling the search terms "value a business" or "estimate a business selling price". Reading through the articles presented will soon get you familiar with the practices and methods used. It is not rocket science!

 
Who receives the enquiries ? And what are my obligations ?

The enquiries are emailed directly, and immediately, to you the seller.

Please remember that we at Biz.for.Sale are NOT business brokers. We perform an advertising, buyer finding and introduction service and are not qualified to act as intermediaries in the transaction. We do not respond at all to the buyer's email and it is up to you to reply and initiate discussions with the party that has expressed interest.

We expect you to make that reply within 48 hours and it obviously is advisable to reply as soon as possible. The potential buyer has a screen displayed after sending off the enquiry which recommends that the page is printed and used for follow up purposes as it lists all details of the enquiry. We advise the buyer on that page that should they receive no reply withing 72 hours (3 days) then they should fax the printout to us and we will follow up with you to ascertain why they have received no reply.

We will also mail you a short note every 15 days reminding you of the listing and detailing a few critical items such as price, short description, etc. This is simply a reminder and there is no need to reply. But every two months we will mail a much more detailed report and it is necessary to reply to that mail confirming that the business is still available and advising of any changes. If we receive no reply to that mail we then have to contact you by telephone.

 
What level of enquiries will I receive...
    Do I need to make preparations to handle these ?

Some businesses will get an enquiry a day, and they may be largely frivolous; while another may receive only one a month, but that may result in a near sale each time. Frequency and quality will vary depending on the listing. We can't tell - but we do see that sellers who give out a generous amount of information receive a higher level of enquiries and they report back to us that their quality of enquiry improves dramatically with more information tendered in the listing. It stands to reason - the level of info will deter the person who then realises the business is not for him/her, and attracts the buyer who perceives the seller to be making a fuller disclosure.

Businesses priced between R100 000 and R800 000 do receive a higher level of enquiries, presumably because they are more affordable.

We recommend that you prepare an "info pack" for people who make enquiries which contains extra information that you are prepared to disclose, but don't want to make available to unidentified persons. ie. abbreviated financials, market prospects, reasons for selling, photographs, etc. You may want the prospective buyer to complete a "Non-Disclosure Agreement" before sending the information. If they are just kicking tyres this will dissuade them from replying, and a competitor or other sneaky type trying to get details of your operations would be similarly dissuaded when facedwith that document.

Having a "ready to send" Info Pack also makes it easy to respond quickly while the buyer is still keen and remembers actually contacting you. Mailing off to the buyer a week or two later is not a good idea.!

 
Confidentiality is absolutely critical.     Can I be sure of this ?

To date, in over 10 years of operation, we have never had a breach of that confidentiality. It would be naive to believe that was impossible, but we certainly have faith in our systems and feel that we can make the claim that it should not be a cause for concern. We understand the important implications at the staff, customer, debtor, creditor and service supplier levels and our staff are trained to be discreet in our communications with you.

When listing the business, you can choose the required level of confidentiality. If "Extreme" is indicated then we will only telephonically discuss issues with the nominated seller contact, and will not leave callback messages.

Please remember that the email address provided will be used for forwarding enquiries and for other related communications such as the reminder notices. Consider the issue, for example, of staff checking your incoming mail when absent from the business.

 
What is “Supression Status” on a listing ?

For various reasons, a seller will sometimes want a business to be temporarily removed from public access. This would typically be intended for a short period only, but sometimes a listing may be supressed for several months. While supressed, the listing will not appear on any search results but links to that record may still be visible in display ads. If so, when clicked on, the visitor is shown an apologetic error message explaining why the record may be unavailable. Here's an example of that.

When deleting a record it is automatically archived and can obviously be restored if the business again becomes available. But this is a manual task and the record is restored with a new reference number which complicates enquiry history and visitor statistics. Supression is a much preferred option where there's a possibility that the business might be relisted within a few months.

    Reasons for a Supression Request would include :
  • The business sale is under final negotiation.
  • An agreement is in place and the sale appears concluded.
  • The seller has experienced market or personal conditions which are not conducive to a sale at present. Retail and hospitality sellers do not want to dispose of the business, nor can they attend to buyer enquiries during the high season periods.
  • There is a broker/seller dispute or a discovery of significantly incorrect data.
  • The sale presentation requires restructuring.

 
How much info should I disclose in the public listing ?

In our experience, the listings that provide comprehensive information receive a higher level of enquiries, and those enquiries are are generally of better quality than those received from an abbreviated listing. This translates into less wasting of your time and a higher probability of an early sale.

Obviously there are considerations of not wanting to have the business identified and there is also the issue of releasing trade secrets. It is important to address the concerns that a buyer would have such as:
• the reason for selling
• profitability
• the management requirement
• the skills and experience requirement
• market conditions and expectations
• the state of competition
• what synergy a new owner could offer

 
What's to ROI (Return on Investment) and where do I enter it ?

ROI is a very simple calculation of annual profit expressed as a percentage of the full asking price and is a basic indication of what the buyer could realise on the purchase. This obviously does not take asset values (and their appreciation or depreciation) into account which can distort the measure significantly.

But some buyers do look at this counter for the first cut when assessing a number of potential targets and it that means one should not refuse to disclose profits at this stage as the ROI then cannot be computed. The website software calculates the ROI percentage based on the monthly profit figure and the price and it is not a value inputted by the seller.

 
I need to change price and details.   How do I do that ?

Should you wish to amend the details that are listed for an existing submission, then please e-mail us at info@bizforsale.co.za   We will use your originating email address to authenticate the instruction. In your message, please clearly detail.....

    -   the Biz.for.Sale Reference Number
    -   the effected section title,
          ie. Long Description
    -   the text or data to be removed,
          ie. Starts: "The factory layout presently...." and Ends "... as per agreement."
    -   the text or data to be substituted.

We use "Cut 'n Paste" functions to clipboard the text from your email into the website listing for typo-free insertion so please double check your spellings and figures.

So a typical instruction could look like the following...........

( 1 )
Under Section: Location
Remove para starts "All areas....." and ends "... are still available."
replace with "The new owner may choose to specify how we will reconfigure the production line and all equipment will be repositioned at the seller's cost."

( 2 )
Under Section: Financial
Replace all with "The unencumbered cash requirement would be R800 0000

 
None of the buyers have finance ?   What can I do about this ?

This is the most commonly reported obstacle to sales being concluded. Buyers either enter too far into negotiations without having secured their funding, or else they (incorrectly) assume that the seller will agree to some self funding proposal. Many BEE deals fail for these reasons and lenders (typically banks) who have agreed to provide funds in principle, balk when confronted with less than suitable securities.

So, to avoid wasted time all round - we would suggest two strategies.

  1. Make it clear that availability to a specified amout of unemcumbered funds must be proven before any information will be released.
    This can be a direct requirement detailed in the Financial section.
  2. Suggest to a buyer that they investigate funding sources which are alternatives to the traditional banking sources.
    We provide links to such sources under the section "Financing Your Purchase".

 
Who has made enquiries so far ?   I need a list to check against.

We provide a system whereby you can call for a full list of enquiries at any time. Simply enter the following URL into your browser, with the Biz.for.Sale Reference ID number substituted for the "xxx" at the end ......
    http://www.bizforsale.co.za/cgi-bin/sendenquiries.asp?Identityxxx
and the full report will be automatically mailed to the same address as specified for your enquiries. This report only details the name of the person enquiring and the date of the enquiry.

Should you have mislaid or never received some of the original email enquiries then (from the automailed list) simply tell us which person and the date of the enquiry and we will forward a copy of the original email(s) to you.

 
I think I've sold the business...   What comes next ?

First thing - let us know. If you're sure that the deal is proceeding, and maybe a sizeable deposit has been paid, then perhaps the listing should be removed. If you don't do that then enquiries will still come in and you'll be responding to people who will ask why you didn't terminate it. If you don't respond to them then they complain to us about no response. We'd all like to avoid those calls.

The other approach is for us to place a prominent note in the short description to the effect that a potential sale is in negotiation. Interested parties are invited to record their enquiries and will be contacted when the deal has either reached an irrevocable stage or has been cancelled. Experience has shown that most listings attract a much higher level of enquiries when such a note is appended. Akin to chumming the water to put fish on the bite, the statement tends to make potential buyers feel that they've missed a deal. Someone else has seen the value, assessed the purchase and made an offer ahead of them. Typically this is when full price cash offers suddenly appear. Your initial deal might well collapse (many do at the due diligence or cash payment stage) and it is comforting to know there are one or two backup offers behind that.

So we've amended the listing, and you have your offer. The next step is to decide if you need some professional help. Many smaller business sales, say of R200 000 or less, are often managed by the seller's business broker with template sales agreements. Perhaps the potential losses of a soured sale are limited by the size of the deal which makes an unassisted purchase less risky to the parties. While this threshhold will vary, at some sale price point it will be advisable for the seller to enlist the help of a lawyer or accountant. Accountants are normally more adept at providing the due diligence service and lawyers would provide better contractual services. You only have to read the Goodricke's article, Matters to Consider when Buying or Selling a Business to realise there's plenty that can go wrong.

Our advice - Call in the professionals and spend a little to make sure your deal has legs and will carry through. Usually the seller would have made a written offer to purchase and that would be the primary document for your lawyer to check. Most legal practices have a partner who would have business sales as his expertise area and they are adept at drafting sales agreements and guiding you through the process.

 
It's all over. Done and sold! Deal closed and the cheque has cleared...
    I'm paid, but what do I pay Biz.for.Sale ?

This is the easy bit, and the bit we like.   :-)   All you need do is let us know and confirm the actual selling price. We will check your contract to confirm the commission rate and then raise an invoice which will also detail our banking details and send that off to you. End of the journey for us.

We do have an audit requirement that we have some documentary evidence of the sale amount and it helps avoid later correspondence if you can give us a copy (by fax is OK) of an accepted offer or other relevant document that evidences the final sale amount. It can be a simple one page part copy of an agreement and we certainly don't need full contract documents.

  Anything we left out, stuff you don't agree with.?
Good article, bad article.?
Please give us your comments and suggestions.  

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