Small businesses are the backbone of the U.S. economy. They are a part of the American dream and have traditionally been one of the avenues for wealth creation.

Did you know the U.S. has more than 33 million small businesses, making up about 99% of all businesses in America? The U.S. Small Business Association (SBA) defines a “small business” as an independent business with less than 500 employees.

Here are some facts about small businesses:

• Small businesses employ 61.7 million Americans, which is 46.4% of private sector employees.
• From 1995 to 2021, small businesses created 17.3 million net new jobs.
• The SBA estimates that small companies create 1.5 million jobs each year, which is 64% of all new jobs created in America.
• In 2021, 27% of small businesses were family-owned, and 5% were fully or partially operated as franchises
•  In 2021, small businesses brought in over $16.2 trillion in gross revenue.
• Since 2021, there have been 16 million new business applications, leading to 2.8 million established new businesses.

Forbes ran an article entitled “Small Business Statistics of 2024” and it’s worth your attention. One of the Forbes facts that surprised me was that 8 of 10 small businesses have no employees. This tells me they are owner or family-operated, and perhaps in some cases, they employ independent contractors or, what we call 1099 employees.

What happens when a small business owner wants to sell the business? What skills are needed from a commercial real estate professional to market a small business effectively? Isn’t the sale of a business just like the sale of any other commercial asset? No, absolutely not!

Selling a business demands a unique set of skills to help analyze, value, market, contract, and close. Sometimes small business owners have limited accounting data. If they have a balance sheet and profit and loss statement, it could be inaccurate. Analysis is a problem without data.

Creating market values for small businesses involves an entire set of facts that need to be compiled, sorted, and reassembled. Owners sometimes have an inflated sense of their business value. One of the challenges I have faced is coaching owners through what I call the “reality zone.” Not everyone will love their business like they do. Small businesses are like families, the members love each other, but others will not share the affinity.

Does the small business owner have an accountant or bookkeeper? You might want to request an audience with their professional accountant to get a clear picture of the cash flow and profit. Believe it or not, some small businesses don’t turn a profit, they exist for the owner.

What kind of sale are you going to be making? Is there real estate involved? What are the assets of the business, and how old are they? Typically, a business sale will utilize an Asset Purchase and Sale Agreement (APSA), which will list every asset being sold. The sale will involve an allocation of assets and goodwill agreed to by the seller and the purchaser.

There are dozens of things to consider when selling a small business, and making sure the sale is documented properly and accurately will be vital to the parties. All of this must begin with a thorough understanding of the business and its economic performance.

Of course, if you need advice about selling you small business, please contact Donald Teel for a no-obligation discussion.

Photo by  Donald Teel