Each year close to one million businesses transfer ownership. Most of these are small companies selling for $100,000 to $12,000,000. These small companies are comprised of privately held corporations, sole-proprietorships, and family owned businesses with annual revenues from $300,000 to $20,000,000.
Yet, until an owner actually goes through a merger or acquisition he or she won’t know what to expect or how to proceed. It is essential that a professional, experienced business broker be brought in to effectively market the company, maintain confidentiality, and advise the owner on the way to best sell a business.
If you’re not ready to sell you should be planning for it now. If you are then Results Business Advisors should be your marketer and advisor of choice. We will guide you through the process and our objective at each step.
Overview of How to Sell a Business
1. Business Evaluation
One of our expert business brokers will give you an opinion of value based on our intimate knowledge of the Midwest marketplace. Business valuations are based on assets, inventory at Seller’s cost and “Owner’s Benefit” (or discretionary cash flow), which is comprised of the corporation’s net income plus owner’s salary, interest expense, depreciation, discretionary expenses and other personal “perks” paid by the business.
The “goodwill” of your business – the value above and beyond the physical asset value – is generally based on a multiple of Owner’s Benefit that varies according to business type and industry.
2. Listing Business for Sale
Once a price is set for how much a client wants to sell a business for (based on multiple methods), we then move to sign a Listing Agreement. This agreement is detailed and defines each of our roles in the process, compensation, effective period and other terms associated with finding buyers for your company.
3. Confidential Advertising/Marketing
The marketing plan to sell a business must be customized to capitalize on the strengths of the company and its future potential. After you agree to list your business with our firm, one of our experts will work closely with you to produce a complete offering memorandum or information package.
Based on your customized marketing plan, Results Business Advisors will advertise your business using some or all of the following methods:
- Business-Only Multiple Listing Services (MLS) – Through our membership in business broker trade associations, our firm has access to several statewide and nationwide computerized business-only multiple listing services.
- Print Media – Still a popular place for those looking for owners looking to sell a business – our firm advertises in the Sunday editions of various newspapers under the column “Business Opportunities”. This may or may not be suitable for your business. Ask your RBA broker about regional or national advertising programs. Industry trade magazines may also be used.
- Internet – Our firm has access to several large, confidential business acquisition web sites. Our own company website, http://www.resultsba.com, is also popular with business buyers in the area.
- Industry Contacts – With your approval, one of our experts may directly contact potential strategic acquirers such as competitors, clients or related industry companies. We are always open to ideas and suggestions in our quest to procure prominent and qualified Buyers for your business.
4. Fielding Buyer Inquiries
We will field and actively pursue all buyer inquiries. Even though some buyers will not be a fit, it is our duty to you as a seller to not pre-judge any buyer. This is a very time consuming process, but extremely important.
5. Financially Qualifying Buyers
Your customized business marketing package will only be presented to qualified Buyers who have signed a Confidentiality Disclosure and proven their ability to buy the business through receipt of a personal financial statement and resume (if applicable).
6. Business Tours/Seller Meetings
Once we have a ready, willing and able buyer identified, we will work with you to set up a confidential tour of your business. You will have an opportunity to showcase your strengths and interact with the potential buyer. We also have helpful information to help prepare for this critical step in a client looking to sell a business.
7. Negotiating Offers/Counter-Offers
Our brokers act as the intermediary in this process and help take the emotional piece out of the equation. Emotions are unavoidable in this process and can derail deals very easily. We are the “glue” that keeps it all together!
8. Assisting Buyer to Obtain Financing
A majority of all business buyers are “first-time” buyers. Around 90% of these buyers will require Small Business Association (SBA) financing, which is a very rigorous process. We have many key relationships with commercial bankers that know the SBA requirements extremely well and can help your buyer feel comfortable during this arduous process.
9. Preparing Sale Documents
One of the most frustrating parts along the path to sell a business can be the paperwork. Results Business Advisors will work closely with your preferred attorney to help create the final Sale Documents. We have an outstanding business attorney highly skilled in these transactions as well if needed.
You can find more about Mark Williams at www.pvwlaw.com.
10. Completing Due Diligence
Getting the buyer to complete this in 4-14 days is key. This step can drag on too long if not accompanied by a broker. We do this as an intermediary and will keep the momentum of this sale going strong.
11. Negotiating Asset Value/Goodwill
Once Due Diligence is completed, we will work with you and your buyer to make any adjustments to asset values and goodwill, if needed. This is the final step before closing.
The day has arrived at last! This is the last remaining step in the process to sell a business, and where the final transition takes place. By this time, all questions have been addressed and funds will change hands.
This day marks a new chapter in both your life and the buyer’s. CONGRATULATIONS!!!