The ABCs Of Selling A Business

After years of sweat equity, careful investments, fighting with banks and government regulations, you’ve built your business into a successful venture.  However, for whatever reason, it is time to move on.  There is a litany of methods to divest your business; however, the most popular way to recover your years of hard work is to simply sell it!  

Did I say “simply”?  With lawyers, banks, buyers, contracts, due-diligence, marketing, accountants and post selling planning, etc., it is an arduous, time consuming task.  That is why getting a competent M&A Adviser who has experience, funding options, contractual department teams, buyer vetting and marketing expertise is an important step in maximizing value and saving transaction time, while you focus on running your business and keeping it valuable!

A proper value for your business must be established.  Too high and the business does not sell, too low, you leave money on the table.  A few business owners rely on their CPA to do the valuation; however, this is always an undesirable outcome.  The most obvious reason not to use your CPA is that he/she is not looked upon as an independent contractor or accepted by lenders / SBA.  This means further evaluations or appraisals need to be done by the buyer and/or seller before banks, SBA or outside investors will provide loans for funding for the buyer.  This delays the sale and you may lose the sale, as it gives the buyer more time to consider other opportunities.  Secondly, the CPA most likely will not know the competitive value of your business in your marketplace – resulting in an erroneous asking price.  Thirdly, the CPA may not do the necessary adjustments for expenses that need to be added back into the business.  Recasting your business is always the proper way to add value and a higher selling price.  After the agreed upon value is established and you decide to sell; an Engagement Contract between the seller and advisor is executed.  The broker then creates with the buyer’s help, a non-disclosing business outline and helps you seek professional tax and financial planning.

Business marketing provides maximum exposure to buyers, often creating competitive offers.  This is done in a way that will expose your business to prospective buyers while maintaining complete confidentiality.  Competent M&A advisors and business brokers will utilize targeted websites, contact previous buyers of your type of business, promote with other affiliates, newsletters, mailings, etc., to get the word out confidentially, while providing timely progress feedback.  After buyers have been identified, the advisor will pre-qualify them (meaning that they have the business expertise and financial backing to do the deal), create a Confidential Memorandum/Prospectus to convey the details of your business to the buyer, arrange buyer/seller meetings and a confidential site visit.  If all goes well, the advisor will prepare the Offer to Purchase.

Closing the deal means just that.  The advisor needs to act as the Orchestra Director to bring all parties together and maintain the deal execution time line.  This includes arranging due-diligence, supporting the buyer in the loan process, arranging license transfers, financial planning for the seller, answering questions, dealing with attorneys and representing the seller in every step of the process.