| Simply put, selling a business is complex. Business | | | | services in order to properly package your |
| owners who decide to sell their business should be | | | | business for a professional presentation. |
| prepared, patient, responsible, and realistic about | | | | Market the business |
| the process. When owners strategically plan the | | | | Finding qualified buyers that meet your criteria is |
| sale of their business, from start to finish, they | | | | absolutely critical. This step requires an added |
| put themselves in a much better position to | | | | layer of discretion. Take time to use the right |
| succeed. Below are some essential steps required | | | | marketing channels for your type of business, |
| for successfully selling a business. | | | | discreetly promote the business to buyers, and |
| Commitment to selling | | | | rigorously qualify interested parties. The more |
| Deciding to sell a business is one of the greatest | | | | popular outlets for business listings include local |
| challenges that a business owner will face. When | | | | national newspapers, internet directories, direct |
| debating your company's future ownership, it is | | | | mail and networking. Your intermediary should |
| imperative that when the business owner makes | | | | facilitate and execute this step so that you can |
| a rational decision to sell, they see the plan | | | | do the next step. Your representative's role in this |
| through. It is only human nature to question if it's | | | | phase is to attract, identify, qualify and introduce |
| the right time to sell, but those owners who see | | | | appropriate buyers for your business. |
| their calculated decision through, will be successful | | | | Keep Running Your Business |
| in the end. | | | | While selling your business may prove distracting, |
| Bring in professionals | | | | it is imperative that the owner continue to run his |
| The sale of your business will require the | | | | or her operation; almost as if it wasn't for sale. |
| expertise of many professionals. In order to | | | | While you will be making sure your ducks are in |
| maximize deal value, terms and closure seek out | | | | row and ready to put on its best face for |
| trusted advisors to protect your best interests. In | | | | potential buyers, taking care of your employees |
| most business transactions, this team would | | | | and your customers is important. It is to the |
| consist of an attorney, business broker, and CPA. | | | | owner's detriment if business sales decline, staff |
| Mixed into these roles and responsibilities is that of | | | | begins asking questions, and if the sale takes |
| a business valuator. More times than not, CPA | | | | longer than anticipated. Maintain business as usual |
| firms do not specialize in business valuations and | | | | and let your business selling team run the ball to |
| getting the price right from the start is a must to | | | | the goal line. |
| maximize seller's value. | | | | Entertain multiple buyers |
| Selling a business is a long, arduous process full of | | | | A business seller who is entertaining several |
| hurdles and bumps in the road. It is at the | | | | qualified buyers is in a position of strength leading |
| business owner's peril if they try to go at it alone. | | | | up to the sale of a business. Not only will this |
| Not only will they most likely encounter | | | | inherently solidify the value of a business with the |
| unforeseen challenges and mishaps, but their | | | | prospects of a bidding war, it will ensure the most |
| business will most likely deteriorate while they're | | | | appropriate buyer is found for the future health |
| trying to juggle all of the responsibilities involved in | | | | of the company. Selling a business is not just |
| successfully selling a business. | | | | about money, it is also about a simpatico with a |
| Conduct a business valuation | | | | buyer and their intentions with the business |
| An independent, third party business valuation is | | | | operation. Looking out for the overall best |
| expected in today's business selling marketplace. | | | | interests of your employees, customers, and |
| The objective and value of a business appraisal is | | | | brand should be an emphasis for a responsible |
| to set a fair asking price so that your business | | | | business owner. |
| assets (both tangible and intangible) are fairly | | | | Due Diligence is a two-way street |
| valued and attractive to savvy buyers. The | | | | Following an Offer to Purchase or Letter of |
| business valuation will validate your asking price, | | | | Intent, your qualified buyer is most certainly going |
| enabling a seller to significantly reduce buyer | | | | to conduct due diligence on your business, its |
| negotiations and confidently stand by their asking | | | | financials, customer lists, employee contracts, |
| price. In some cases, the professional broker will | | | | vendor relationships and other elements you claim |
| have access to a reputable business valuation firm | | | | to be in place with the sale of the business. While |
| and may be able to facilitate the process of | | | | this is a normal process, typically lasting a couple |
| preparing your company for a business valuation. | | | | of weeks (sometimes longer based on deal size), |
| Many brokers do offer an opinion of value, but | | | | due diligence should not just be from the buyer. |
| using the expertise of a credible, business | | | | You, the business owner, should be conducting |
| valuation firm can be one of the best decisions a | | | | due diligence on the potential buyer. Beyond |
| business owner will make; inaccurately valuing a | | | | financial buying power and purchase price, you |
| business (high or low) can be very damaging to a | | | | should be interested in their background, intentions |
| business seller. | | | | with the business and its key employees, |
| Confidentiality, Confidentiality, Confidentiality | | | | management philosophies, maintaining culture, etc. |
| It is obvious that the majority of business owners | | | | Instruct your business broker to find out why |
| do not want to hang a for sale sign on their | | | | inquiring buyers are interested in your business, |
| business, alerting employees, customers, and | | | | ask for a resume, and dig for answers. |
| vendors of their intentions. Maintaining discreetness | | | | Close the Deal |
| during the sale of your business is a must. All | | | | The professional team you assemble to help |
| parties advising you on the sale of your business | | | | execute the sale of your business, should serve |
| should first sign a confidentiality agreement. You | | | | as a buffer between you and potential buyers |
| can prepare a simple mutual NDA or ask these | | | | when it comes to negotiations. Common areas |
| professionals for their boilerplate agreements. In | | | | that are negotiated are purchase price, terms and |
| addition, all potential buyers will need to sign a | | | | deal structure, non-competes, owner training |
| non-disclosure agreement before any material | | | | support, etc. Your business broker is a conduit |
| information about the business is shared. Once the | | | | and should be able to effectively represent you |
| business is being listed, your broker should | | | | when it comes to terms, inclusions, and exclusions. |
| operate carefully as a blind business listing is | | | | Above all else, it is critical that you not only rely |
| meant to peak buyer interest, not to give them | | | | on your broker, but also your attorney, when |
| enough details to figure which specific business is | | | | negotiating, drafting and accepting terms in the |
| for sale. It is at the owner's peril if they do not | | | | Purchase Agreement. The seller's attorney and |
| ensure confidentiality is maintained throughout the | | | | buyer's attorney will need to actively |
| process; if a prospective deal goes south or if the | | | | communicate with one another to get everyone |
| seller changes their mind about selling, the business | | | | to the closing table and seal the deal. |
| will be protected going forward when | | | | Don't fumble the handoff |
| confidentiality has been preserved. | | | | Most buyers will seek assistance from the seller in |
| Get your affairs in order | | | | the transition of the business. The involvement |
| When entertaining prospective buyers, they will | | | | and seller participation is going to significantly vary |
| want to closely analyze your financial statements, | | | | by industry and type of acquisition, but you should |
| both past and current. It is important that all | | | | prepare to stay on board for a reasonable period |
| adjustments and reporting be made prior to | | | | of time. This is an essential step in the successful |
| presenting balance sheets as any material change | | | | transfer of a business so that the company's |
| prior to closing will have an impact on the final | | | | operations, employees, customers and overall |
| purchase price. In addition, larger operations with | | | | stability are protected. Just as a quarterback has |
| $5MM+ in annual sales should have their financial | | | | to mechanically hand the ball to a running back, so |
| statements audited. While this is not cheap, it | | | | does a seller hand the business off to a buyer. If |
| reassures buyers that your asking price is fair | | | | this is rushed or done in a nonchalant manner, the |
| based on legitimate financial reports and studies | | | | business could stumble, take a dip and experience |
| have indicated this serves as a value driver in | | | | rough road ahead. A responsible business seller will |
| purchase price. Other areas you should focus on | | | | dedicate time to work with the new owner, at no |
| include lease agreements (if you do not own real | | | | cost, typically lasting several weeks to a couple of |
| estate), key employee contracts, key client | | | | months. Any period longer should come at the |
| contracts, etc. Finally, get your physical business | | | | business buyer's expense and a previously agreed |
| location(s) in presentable order by cleaning, | | | | upon rate of compensation. |
| organizing and preparing for VIP visitors. | | | | There are all types of complexities in planning and |
| Package the business | | | | executing the sell of a business. The smart |
| Presenting your company's information to buyers | | | | business owner will enlist the services of |
| is going to be important to ensure they are | | | | professionals who can help them carry out a full |
| informed, educated and more importantly | | | | exit strategy which will most often lead to: |
| disclosed about the state of your business. They'll | | | | securing a higher purchase price, selling to the |
| want to learn about your operation, industry, | | | | most qualified buyer(s), ensuring the business is |
| financial performance and future prospects. A | | | | prepared for a handoff, and protecting the |
| confidential, presentation package is needed with | | | | futures of existing management, employees and |
| most buyers. Professional business brokers should | | | | clients. |
| be able to extend these types of value added | | | | |