Seller financing is one of those terms that often surfaces in business sales, but it is not always well understood. At its core, seller financing means that the Seller agrees to finance a portion of the purchase price, allowing the Buyer to pay part of the deal over time instead of entirely at closing. This approach can unlock opportunities for both parties, but it also carries risks that should be carefully weighed.
Selling a business is one of the most significant steps a business owner can take. Unlike selling a house, where open marketing is the norm, the sale of a business has to be handled with discretion. Confidentiality is not just a best practice. It is one of the most important ways to protect both the Seller and the business itself throughout the process.
When a business changes hands, it’s easy to focus on the dollar signs. Buyers want to know if they’re paying a fair price. Sellers want to know if they’re getting rewarded for years of hard work. But behind the numbers, there’s something bigger at play: selling a business is not just a transaction, it’s a transition.
When a business owner begins the process of selling, one of the first questions is: “How much can I get for my business?” Valuation plays a key role, but it is important to recognize that the value calculated for a business is not always the same as the eventual asking price or the final sale price.
A valuation provides a baseline. What a Seller ultimately lists for, and what a Buyer ultimately pays, can vary based on goals, timing, and deal structure.
By Owen Murray, The BusinessSellerCenter
A business broker’s role is to serve as an intermediary and as a trusted advisor to their client. With that, the broker should always be acting in their client’s best interest. This does not mean, however, that a business broker should avoid challenging either party involved. In fact, it is often in everyone’s best interest for the broker to take on the role of Devil’s advocate. By asking the tough questions, pointing out inconsistencies, and pushing for clarity, a broker can prevent misunderstandings that could derail the sale later on.
When it comes to selling a business, transparency is one of the most valuable tools a seller can have. While it might seem tempting to downplay a problem or leave out an uncomfortable detail, those decisions can have serious consequences once due diligence begins.
The due diligence process is thorough by design. Buyers and their advisors will comb through financial statements, contracts, customer records, employee matters, and more. Any red flags that surface late in the process can create doubt, stall negotiations, or even cause a deal to collapse. Broken trust is hard to regain.
Selling your business is all about minimizing risk to buyers. Buyers are going to look at and evaluate a business differently than a seller/owner might. A business owner may think that they have a great business simply because they have strong sales and are profitable. Profits and earnings are important, but buyers are looking at a much bigger, broader picture. Let’s discuss three red flags that indicate risk to a buyer.
For business owners thinking about a future sale, understanding the basics of business valuation is a critical first step. One of the most important, and commonly referenced figures in small business transactions is Seller’s Discretionary Earnings (SDE).
