Sell Your Business

Managing The Sale of Your Business

When it comes to selling a business, research shows that many owners have a limited understanding of the process and often make fundamental mistakes that can seriously undermine the final sale price.

Selling a business has become a complex transaction that is subject to many legal and financial conditions.

Many businesses change hands every month in a planned, orderly way with owners realizing excellent value.

Others are sold in a less rigorous do-it-yourself fashion that often leads to poor results which are compounded by frustrating delays and ongoing uncertainty.

The Valley Business Broker offer an approach to keep things moving forward in an orderly manner to ensure that sensitive information is protected, uncertainty is avoided, and the best price is achieved.

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Personally prepared by Steve Barnett, CPA/MBA Business Broker

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    Office Address

    22510 Hartland Street West Hills, CA 91307

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    Phone

    (818) 625-2713

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The Process

Advance planning is important to make sure your business is performing well when marketing your business for sale. The majority of buyers make their investment decision based on the verifiable revenues and profits being generated from the business being sold. As a result, Buyers want to be sure that these revenue and profits will transfer to the buyer after the sale is closed. Critical factors buyers look for when evaluating a business are: + Are the revenues and profits increasing and/or stable? + How accurately are income and ‚Äčexpenses shown on the business tax returns? + Is there a strong management team in place? + Are there contracts in place with key customers/suppliers? + Are there documented policies and procedures? + How likely will the customers remain with the business?
Experience has shown that there are a large percentage of business owners who do not know what their business is worth, nor how to go about establishing its true value. Some owners have a figure in mind of what their business is worth, often over inflated because of their emotional attachment. Others undervalue their business because they do not know the various valuation methodologies and which is most appropriate for their specific business. There are several established methods of determining the value of a business. In most cases, The Valley Business Broker uses a combination of these to determine the Most Probable Selling Price. Most of the approaches we use are market-based approaches and we can not only provide our opinion of value, but we can show you exactly how we got there.
After preparing the offering memorandum, we will identify and compile a list of potential buyers from our database. Over 30% of businesses that are sold by The Valley Business Broker are buyers that we already have established a relationship with. Depending on the type of business, we will also target strategic buyers in closely related industries which we will contact with your approval.
After preparing the offering memorandum, we will identify and compile a list of potential buyers from our database. Over 30% of businesses that are sold by The Valley Business Boker are buyers that we already have established a relationship with. Depending on the type of business, we will also target strategic buyers in closely related industries which we will contact with your approval.
Our Program is designed to reach the maximum number of potential buyers without disclosing your identity. The marketing program includes advertising in various online sources, some of which are geared towards the end buyer while others attract business intermediaries which represent buyers looking for a particular type business. The Valley Business Broker is also part of a regional and national network of intermediaries which greatly increases the exposure your business will receive. Identifying the motivations of different types of buyers is important part of the VBB program. Generally, third party buyers fall into one of three categories; Financial Buyers - people looking for a company which they intend to run as owner/operators. Strategic Buyers - companies in your industry (or a similar industry) looking to expand via acquisition. Strategic buyers often realize cost savings (consolidating operation into one location, eliminating headcount) or increased revenue (selling their products to your existing customers). The Valley Business Broker aggressively targets strategic buyers since synergies often create increased value for the buyer - and this can translate into an increased selling price. Private Investors & Private Equity Funds - people or investment groups considering investing in private enterprise with less than full-time involvement. Pre-Screen Buyers It is important to maintain confidentiality until the buyer has been identified and pre-screened to assess their financial and operational capability and that their intentions are genuine. The initial screening process is designed to confirm that the buyer is in a position to complete the purchase and is motivated to do so. After the buyer has executed a confidentiality agreement and buyer profile, we will provide the buyer with the Confidential Offering Memorandum, provide a company overview and answer any initial high-level questions the buyer may have.
It is important to maintain confidentiality until the buyer has been identified and pre-screened to assess their financial and operational capability and that their intentions are genuine. The initial screening process is designed to confirm that the buyer is in a position to complete the purchase and is motivated to do so. After the buyer has executed a confidentiality agreement and buyer profile, we will provide the buyer with the Confidential Offering Memorandum, provide a company overview and answer any initial high level questions the buyer may have.
After a buyer has reviewed the Confidential Offering Memorandum and expressed interest, The Valley Business Broker will coordinate an introductory meeting between buyer and seller. Depending on the results of the meeting, a buyer may have additional questions and will usually require further information and/or documents. Selected information is supplied ensuring that any sensitive material is withheld until an offer has been made and progressed under the terms of the due diligence. Securing a buyer's trust and confidence is critical to achieving a successful sale. Difficult questions will be asked and you must be prepared with honest, plausible answers.
Provided the buyer has been supplied with all the basic information they require, The Valley Business Broker will work with the buyer and their professional advisors in preparing a Sale and Purchase Agreement detailing the price, terms and conditions of the offer. In some situations, a buyer will prefer to present a Letter of Intent (LOI) to Purchase with commitments to enter into a Purchase Agreement later depending on the outcome of due diligence and/or conditions specified in the LOI. The Valley Business Broker plays an essential role in negotiating the sale on your behalf and can often recommend win-win solutions that help keep the deal moving forward and increasing the chances for a successful close.
The Purchase Agreement will likely include a due diligence clause, giving the buyer a specified period of time to investigate and confirm that the information supplied is accurate. This is also the Seller's time, with The Valley Business Broker 's help, to verify the buyer's creditworthiness, qualifications to run the business, and verification of funds to cover the down payment and working capital. The due diligence process can take anywhere from 10 days to 2 months depending on the size and complexity of the transaction. A buyer can terminate an agreement for a number of reasons during the due diligence process, but this is less likely to occur if the Confidential Offering Memorandum is explicit and accurate.
In most cases, The Valley Business Broker will work with an escrow company that specializes in bulk sale transfers to ensure that the business is being delivered free and clear from all liens and is compliant with all local and federal government entities. Escrow will also create the final bill of sale and draft the promissory note and security agreement if seller financing is involved. The escrow process typically takes four weeks and can either be accomplished after in or parallel with the due diligence process.
Once all conditions in the purchase agreement and escrow instructions have been satisfied, it will be declared unconditional. The Valley Business Broker will work to finalize the details required for the closing to take place on a specified date. After closing, the seller will train the buyer for an agreed period of time to facilitate a smooth transition. We can provide you with a list of things that typically need to be done pre and post-closing to help ensure a smooth transition.