Hi,
I am in the proccess of selling my company and have been asked by a few people how payments would work. What is the usual payment schedule for the sale of a company? I was thinking about a down payment of say 50% and then installments for the remaining 50%. However if I do that I am worried they will make the first payment and I will never see another dime or they will some how back out (even with a signed contract I would not want to have to go through courts to recieve the remainer of the money). Not to say this will happen but I am trying to consider the possibilities. So is it unreasonable to ask for 100% upfront? If anyone has any suggestions they would be greatly appreciated.

I say 100% are ok if the other party is serious and you too.

When you go to the store and buy groceries do you write a check for 50% then mail in monthly payments?? Don think so....

So why would you do that on a sale of a company. I would ask for 100% at the completion of the sale. Then within 30 days of the payment being cashed (make sure it does cash and they dont place a hold on the check) Migrate your business over to them. Remember that even though they are now part of the company you sold them to, they were once your clients. Show them respect and make sure things migrate with ease. No need in shi*crap* :) hitting the fan leaving your reputation on the line. You never know when you go on another venture

Yes, however going to the store to buy groceries is a much smaller price tag then the cost of a company. I would like 100% upfront but I'm not sure if that would happen. Is it reasonable to request the buyer to take out a loan? Or is it safe to take say 50% upfront and the rest in installments?

It's up to you on what you want to do.

If you are willing to 'finance' the sale yourself, then go ahead and shoot that route. You will most likely find more willing buyers, however you of course won't get all the money up front.

This is your company, you can sell it how you wish and acquire the money as you wish. If you want 100% up front, do it... if you only need 25% up front, and then the rest on a monthly basis + interest or still a stake in the company, go that route.

I would highly reccomend getting some form of certified payment however. Either have them get a cashiers check, or certify the funds with their bank right when you receive the check.

With the sale of a company, you should/will most likely have attorneys filing certain pieces of paperwork, have them writeout a contract that outlines the payment structure or your continued stake in the company or whatever you wish. Many many companies are financed through the seller, and this wont be something unusual at all for them to writeout.

If you wanted to do some sort of financing, make sure you get a lawyer, have a written agreement, and if it is shorterm, make sure that they legaly are not the owner until after all payments are made.

When you assume seller financing for a portion of the sale price your risk is of course higher. So naturally you demend a higher price compared 100% upfront pricing. Most of the time buyer asks for a seller financing to reduce their risk. If it was just money most of the buyers can walk into bank and a loan with beter terms than from a seller. In such conditions you have to meet the buyer some where in the middle.

You are worried if the buyer will run away from teh second payments. At the same time your buyer is worried, if she is getting what is explained or is it just a empty web site with no real customers. In any case get a lawyer to do the contract, with or without financing. Good luck with your sale.

I think that a 50%/50% is reasonable. The way you should do it is transfer the ownership of the clients and the website to the buyer after the first portion of the payment.

After everything is transfered, ask them to submit the second portion and when they do, transfer the domain to them.

As long as you hold on to the domain, your risk is pretty much minimal.

Boris

Sorry to bud in here... (I've been browsing the forum for a while now.)

I've sold a web design company already and here's one suggestion that worked for me:

Hopefully, you've incorporated your company so that you own 100% percent of it's shares. If this is the case, ask for as much of a downpayment as you think you can get. Then finance the rest of the sale over a year or two (or more if you're comfortable.) Make sure you are charging an interest rate that is worth your while. I've seen rates average around 8%.

In terms of securing the loan so that the buyer doesn't take off and leave you empty-handed, secure the loan with the shares you just sold him or her. In the event that they default on the loan you get some or all of your company back.

Above all else, make sure the details of the sale and the financing are provided in writing. Then, before you sign, hire a lawyer for a couple hours to review the whole transaction. It'll save you a lot of pain and frustration in the future--trust me on that one. I got burned once!