Business Sale Terms and Structural Factors, Part 1

While the final sale price of a business during any business sale is obviously very important to both buyer and seller, this is not the only relevant factor that defines the sale. There are also other important variables during any business sale or purchase, including a variety of potential sale terms, structural elements and related factors.

At Utah Business Consultants, our business brokers are happy to help with every element of business sales, including everything from business valuation to setting a price and covering all the important term or structure areas. What are some of the key elements to consider while setting both your price and terms during a business sale? This two-part blog series will go over everything you need to know, including some of the structural elements that might be present in your sale.

business sale terms structural factorsPrice Only Tells a Partial Story

Again, before we go any further: Price is important. You should not sacrifice huge chunks of your selling price based on minuscule term areas, and our brokers will ensure you never give up too much in this area.

That said, there are numerous situations where other factors are also important. Some sellers will be willing to accept a small down payment from the buyer, for instance, and carry a payment balance over time – this generally allows the buyer to ask for a higher price. If the seller wants more cash up front, on the other hand, the full price will usually drop. This is just one simple example of how such terms can  work; there are numerous others, which we’ll go over later.

Goals and Structure of Deal

As you’re moving forward with a sale, you should be considering your actual goals of the process as you move through it and set structural areas. We deal with some business owners, for instance, who want their deal completed as quickly as possible for any number of reasons – for such an individual, timing might matter more than price, and the deal might be structured to reflect this even if it means sacrificing a small amount on the bottom line. Other sellers might set terms on where the business can be moved (or if it can be moved at all).

Ranking Factors

One good tool for sellers in this position is going through all the potential factors outside final price that might be important to you. If there are several, rank them in order if importance and how much flexibility you might be willing to show on them in the final price. Here are some factors:

  • Amount of cash involved
  • Financing or no financing?
  • Qualifications of buyer
  • Confidentiality
  • Closing costs
  • Exclusive listing
  • Commission or selling fees
  • Advertising and marketing themes
  • Conditions for the new owner to maintain or continue the business

For more on factoring in terms and structure for your business sale, or to learn about any of our services with selling or buying a business, speak to the staff at Utah Business Consultants today.

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