When a Seller hires me or my company to represent him or her in the sale of their business, successfully navigating the business sales transaction generally involves a seven step process from the start of the process to a successful sale and to the close of the transaction.
1. Gathering information to learn about their business
2. Prepare an assessment or a valuation to determine its value
3. Develop an outline or a goal as to what transaction structure will be most beneficial to the Seller consulting with the Seller’s other advisors as necessary
4. Prepare a marketing package, advertise and prospect, and identify qualified buyers
5. Either write or help facilitate a term sheet, letter of intent, or purchase agreement and negotiate on behalf of the Seller
6. Traction may be gained or lost during due diligence and we make sure that documents are delivered and reviewed in a timely manner
7. Bring Buyers and Sellers and their respective lawyers together to successfully close the transaction
More…1. Gathering information is a critical first step in learning about a business and being able to present in a positive and customary manner and also in a format that is consistent with generally accepted accounting principles (GAAP). Depending on the size and type of the business much of the following information may be requested of the seller:
• Accts Payable Report
• Accts Receivable Schedule & Aging Report
• Business Hours
• Certificate of Good Standing
• Company Organizational Chart
• Company Write Up
• Contracts to which the Business is a Party
• Corporate Charter & By-laws
• Corporate Minutes Books w/updated Minutes
• Customer Information Profile
• Detailed Depreciation Schedules Listing Each Fixed Asset Owned
• Employee Benefit Plans
• Employee Retirement Plans
• Equipment & Vehicles Leases
• Existing Financing Notes
• Financial Statements: 3 yrs & year-to-date
• Franchise Agreements
• Labor/Employee Contracts
• Licenses, Registrations for Patents, Copyrights, trademarks, etc.
• List of Equipment & Vehicles
• Listing Information Questionnaire to be Completed by Seller
• Marketing Package
• Monthly Sales Tax Records
• Other Agreements
• Payroll Information including description of each employee’s position, key man info, number of hours worked each week, and hourly wage or salary:
• Payroll Quarterly Summary Reports
• Premise Lease
• Summary of Insurance Coverage
• Tax Returns: 3 years
• Valuations & Appraisals
• Value of Inventory
• Website Domain URL and Other Domain URL’s
If there is also real estate involved:
• Real Estate Appraisals
• Real Tax Assessment Notice
• Real Estate Tax Bill
2. We prepare an assessment or a valuation to determine the value of the business by utilizing the detailed financial information supplied by the Seller. We use the following tools or methods to determine the fair market value of the business.
• Valuation software
• Industry standard multiples of earnings or of gross revenue
• Comparables obtained from national done deal databases when available
• Valuation of tangible assets including special equipment, tangible assets and any other assets of unusual value
3. Develop an outline or a goal as to what transaction structure will be most beneficial to the Seller consulting with the Seller’s other advisors as necessary.
• A target plan may minimize the Seller’s tax liability
• Depending on the Seller’s needs they may want to maximize or minimize the cash down-payment
• A monthly payout for a shorter or a longer term may be preferable in order to provide set payments with interest to maximize the long term value of the transaction
4. We prepare a marketing package, advertise and prospect, and identify qualified buyers. This stage generally takes the greatest amount of time. We put together a marketing package usually in the form of an offering prospectus which is commonly known as a Confidential Business Review (CBR) in the business brokerage profession.
• Compose a CBR
• Identify markets and target different types of buyers
• Market and prospect
* Letter writing
* National websites
* Various paper and online publications as is appropriate
• Endeavor to attract multiple qualified prospects
5. We either write or help facilitate a term sheet, letter of intent, or purchase agreement and negotiate on behalf of the Seller. This involves skilled negotiations and problem solving abilities honed during our many years in the profession both through academic training and hands on experience.
• We represent the Seller during the entire process and will skillfully negotiate to protect the Seller’s interests and are careful not to lose the deal
• Ultimately the best deals result in a win-win situation for both parties
6. Traction may be gained or lost during due diligence and we make sure documents are delivered and reviewed in a timely manner. This may be the most critical stage and is where deals are often confirmed or lost.
• We aggressively facilitate and pay close attention to deadlines for delivery by the Seller and timelines for review of documents by the Buyer
• We effectively resolve or mitigate questions and conflicts that generally will arise
• We often participate with lenders and work with Buyers and Sellers in satisfying underwriting requirements
• Landlord or real estate requirements are facilitated and / or negotiated by us
7. We bring Buyers and Sellers and their respective lawyers together to successfully close the transaction. After due diligence is completed we make sure important loose ends are tidied up to help assure closing will take place as scheduled.
• Cash adjustments include payroll, utilities, insurance, personal property tax, etc.
• Agreements concerning cut-offs for cash receivable may be of critical importance
• Trade license transfers need to take place or be applied for
• Final landlord approval and documentation must be provided
Using a skilled and experienced business broker or business intermediary like myself dramatically increases the chances of successfully navigating the transaction process and of maximizing the value a Seller will realize from the sale of his or her business.