From Valuation to Closure: Test Your Expertise in Selling a Business

Selling a Business

Welcome to Selling a Small Business Quiz!

This quiz will test your knowledge about selling and acquiring a business. Are you ready to put your knowledge to the test?

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1. When is the best time to sell a small business?

When the market is strong, and revenue and profits are growing

When the business is struggling and needs new leadership

During a recession when people need work

When the seller is ill and can’t manage it properly

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2. What are the two types of small business purchases?

Cash and Credit

Asset and Stock

Synergistic and Corporate

Revenue and Profit

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3. For sellers of an S-Corp, which type of purchase yields more favorable tax treatment?

Asset Purchase

Stock Purchase

Both

Neither

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4. What are the two classes of small business buyers?

Cash and Credit

Rich and Poor

Synergistic and Financial

Revenue and Profit

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5. What is the most important factor in determining the value of a small business for a strategic buyer?

Revenue

Profit

Number of employees

Synergies

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6. What is the most important factor in determining the value of a small business for a financial buyer?

Revenue

Profit

Number of employees

Location

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7. How long does it typically take to sell a small business?

A few days

A few weeks

A few months

A few years

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8. What is a common mistake business owners make when selling their business?

Not preparing the business for sale

Overvaluing the business

Not disclosing important information

All of the above

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9. What is an earnout agreement?

A contingent payment that the seller only receives from the buyer when specific performance targets are met

An agreement to pay the seller a series of fixed payments for an agreed-upon number of years

An agreement to pay the seller a portion of the profits for a set period

None of the above

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10. What is the purpose of a letter of intent when selling a small business?

To outline the terms of the buyer’s offer

To legally transfer ownership

To provide financing for the buyer

To outline the terms the seller is willing to accept

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11. What is a due diligence period?

The period during which the buyer reviews the financial and legal records of the business

The period during which the seller reviews the buyer’s purchasing plan

The period during which the seller prepares the business for sale

None of the above

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12. What is the best way to determine the potential sale price of a small business?

Look at the last three years’ revenue and multiply by three

Looking that companies balance sheet to determine its book value

Hiring a professional business appraiser

Ask your CPA to compute it

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13. What is a common way to market a small business for sale?

Word of mouth

Newspaper ads

Online business-for-sale listings

None of the above

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14. When marketing a small business, in what circumstances should a seller include an asking price?

Every time

Only when the business includes real estate

Sellers prove value, and buyers determine the price

When the business has employees

Your score is

The average score is 68%

From Valuation to Closure: Test Your Expertise in Selling a Business

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