Selling a Business
- DETERMINE YOUR OBJECTIVES: There will be an introductory meeting to gain an understanding of your business for sale and your personal objectives. We will provide you with a signed Confidentiality Agreement for your protection. Your needs, objectives, business history and basic financials will be discussed. We will discuss possible options for the transaction. Selling options may include: sell and retire, sell and remain with the Company, take on a partner, receive a capital infusion, etc. Thinking this through in advance will expedite the process of finding a suitable alternative.
- LISTING AGREEMENT or LETTER OF ENGAGEMENT: Once we have agreed on the objectives and have gained an understanding of your business, Quasar 3 Business Services (BRE# 01944838) will recommend a preliminary action plan. A Letter of Engagement or Business Listing Agreement will be signed which will outline the terms of the assignment, the fee structure and any special provisions or stipulations for the engagement.
- INFORMATION COLLECTION: You will be provided with a list of required information. It will involve gathering financial, as well as general information, on all aspects of your business for sale. Proper preparation is crucial for the best presentation of your business and is also the first step in establishing the confidence of a Buyer. Adequate information will enable a Buyer to gauge their level of interest.
- FINANCIAL PRESENTATION: Financial statements are prepared for both management control and tax purposes. However, there are occasions when prepared financial statements do not adequately reflect the financial returns from your business. We will restate your financials using industry-accepted methods to establish the true financial returns being generated. The recasting of financial statements requires identifying and adjusting for normalized owner’s salary and fringe benefits, as well as one-time, non-recurring and non-applicable expenses. A Buyer must be educated to accurately interpret the recast financial statements in order to recognize your Company’s true worth.
- BUSINESS VALUATION: Many people will recite the rules of thumb for valuing businesses. We are familiar with these guidelines but utilizes a broader and more analytical approach when valuing a business. Determining the fair market value of your business is an involved and complex procedure, with constant movement based upon a changing marketplace. Proper consideration must be given to your Company’s strengths, assets, historical financial performance and projections, along with the many intangibles inherent in your Company. Market conditions, industry trends and public perception will impact value. Capital availability as well as your flexibility with terms will also impact value.
- We utilize several different business valuation methodologies to determine the right price for your business. In addition to financial and industry analysis, comparisons will be made with similar companies that have sold recently within your industry. By determining the highest price a fully informed Buyer is willing to pay for your Company, you will avoid the risk of losing a timely sale by overpricing the Company, or leaving money on the table by undervaluing your business.
- PREPARATION OF A MARKETING BRIEF: Your business for sale will be confidentially marketed in several ways. We will prepare a brief description of your business and post it on our website. Depending upon our agreed marketing strategy, we will also display it on up to over 20 additional websites. Our internal marketing staff have ongoing contact with potential buyers that have already been financially qualified.
- PREPARATION OF A CORPORATE PRESENTATION: The business must be properly packaged with all applicable records and facts organized and documented. The profile of your business ensures presentation in a favorable and factual light while providing the acquirer with a document to follow and review. The profile educates Buyers on the many intangibles inherent in your Company and the opportunities for growth, hence raising the perceived value to the acquirer. These intangibles include name recognition, market niche, vendor relationships, operation and production systems, distribution channels, customer loyalty, trained and skilled employees, and many more.
- IDENTIFYING CRITICAL AND CONTINGENT ISSUES: We will work together to identify and be prepared to address issues such as leases, regulations, licensing, key employees, minority shareholders or other concerns that might apply to your specific situation. Failure to address these issues early on in the process can potentially lead to the loss of qualified Buyers, along with months of wasted activity.
- MARKETING STRATEGY / CONFIDENTIALITY: In addition to the marketing brief that will be posted on the internet, we will work together to determine the most likely type of Buyer and how to approach them directly and confidentially. There are a number of different marketing strategies available, which will provide the necessary exposure while maintaining strict confidentiality. There are steps that can be taken to guard against your competitors, employees, vendors and customers ever finding out about the pending sale of your business.
- We will develop a strategy for bringing the Company to qualified Buyers. We will seek a Buyer that will perceive the greatest value and synergies in your business. Identifying the right acquirer for your business can significantly impact its valuation.
- PRE-QUALIFICATION: We will screen and qualify potential Buyers as to their interest level, management skills, fit and ability to meet the financial requirements of the transaction. Before revealing the identity of your business or discussing any sensitive information we will obtain a Confidentiality Agreement from all interested Buyers. Only qualified Buyers will be provided with a copy of the profile. A follow up phone discussion will answer preliminary questions.
- INITIAL MEETING: After the initial phone discussion with a potential Buyer, we will host a brief introductory meeting. The purpose of the meeting is to allow the Seller and the Buyer to gain an understanding of background, motivation, prospects and other high level items.
- SITE-VISIT: Working together to maintain confidentiality, the potential Buyer will be provided with the opportunity to visit your facility. This is a good forum for the Buyer and Seller to develop a favorable rapport. More detailed information can then be exchanged.
- PURCHASE OFFER / NEGOTIATIONS: Upon a meeting of the minds regarding the key transactional issues, a written offer to purchase or letter of intent will be prepared. It should outline the purchase price, terms, conditions and any contingencies. Proper compliance with this step can save thousands of dollars in legal expenses.
- DUE DILIGENCE: The offer is usually contingent upon the Buyer or their representatives verifying the accuracy of the Seller financial and operational representations. This detailed review is typically completed within 30 days of the signing of offer to purchase.
- CONTRACTS: After all major issues are resolved and the Buyer’s accountants and attorneys are satisfied with your representations, contracts can be drafted and negotiated. Financing can be arranged. This can be the most trying time in the entire process. Many times, an independent attorney or accountant can expedite the process of closing the transaction and save significant expense for both the Seller and the Buyer.
- CLOSING: We will coordinate the escrow, arrange for funds to be transferred, applicable fees to be paid and it is at this point that you will have realized your goal.
- TRANSITION PERIOD: This typically involves a period of cooperation in which you will assist the acquirer in achieving a seamless transition. This includes transferring of key relationships and proprietary information needed to successfully operate the business.
IN CONCLUSION: The entire process can take a few weeks, a few months or a few years depending upon the circumstances. In any case, we will assist in every step of the process. We look forward to working with you on this very important assignment.
How can I contribute to the successful sale of my business?
As a Seller, you can contribute to your own success in many ways. Remember that your view of the business for sale may be different than the view of a potential Buyer. Here are a few guidelines:
- Be friendly and cooperative. If the Buyer requests information, provide it as soon as possible. By responding quickly, you will help establish trust and give the impression that your business is well managed, and that you have nothing to hide. Delays may lead to a skeptical Buyer.
- Communicate openly and honestly. Many transactions are completed because trust and good chemistry exists between a Buyer and Seller. This develops through honest, frequent communication.
- Be ready to disclose sensitive information. Be prepared to discuss financial information, customer/market information, product secrets, etc. This allows the Buyer the ability to develop a deeper understanding of the operation of your business.
- Avoid being defensive. Buyers will often ask questions that may seem a little personal, but rarely are they intended to serve any purpose other than gathering needed information for a Buyer to make a decision.
- Help the Buyer see him/herself as the new Owner. Look for the potential in the Buyer and let them know they are capable of successfully managing the business.
- Make your business a showplace. First impressions do count. You have become accustomed to the look of your place of business so step back and look at it through new eyes. A Buyer will quickly draw conclusions about product quality and the general organization of the business based upon the appearance of the facility.
- Be candid and optimistic about growth opportunity. A Buyer will view your business from the perspective of managing and improving it. There are probably several things that you could suggest a new owner do to accomplish this. Help the Buyer understand these business opportunities and allow them to see the upside potential.
- Make yourself available. Once a serious Buyer has been identified, plan meetings when you will not have the threat of canceling or being interrupted with phone calls, etc. As due diligence begins, this will become even more critical. You may think that being busy might cause a Buyer to feel there is good business activity, but instead they feel that you are not serious about selling. Keep appointments — make yourself available and be attentive.
- Keep financial records current. Time kills deals. When a Buyer has to wait weeks for a Seller’s accountant to prepare financial statements, the enthusiasm to move forward is sometimes lost.
- Understand the emotional roller coaster. Whatever the selling motivation, there is almost no way to avoid the emotions you will experience as you go through the due diligence and sales process. The Buyer will also be participating in similar emotions. You may find you have to keep reminding yourself of the original reason for selling.
- Create a team of professional advisors. Surround yourself with a team of qualified transaction-oriented professionals around you who understand that your goal is to sell the business in a timely manner. Bring them into confidence early in the process so there are no surprises. Make sure that they know you want their support and assistance in achieving a successful transaction. If your existing advisors are not experienced with similar transactions, as professionals, we can assist you by providing names of qualified advisors.
- Continue to focus on the business. It is easy to let your enthusiasm about the business sale distract you from running your business. It is imperative that you continue to focus on business as usual so that the business remains healthy and vibrant during this very critical time. A Buyer wants to inherit a business that has been well managed right up until the sale is consummated. Do not postpone or ignore critical decisions.