SELLING A BUSINESS
Selling a business is one of the most important financial decisions you will ever make. It affects your family, your future, your livelihood and your peace of mind. You owe it to yourself to plan carefully and approach the sale with the same commitment and enthusiasm as you did when you entered the business.
Certified Acquisition Advisors is the firm to best assist you in the sale of your business. We’re different. Certified, C-Level and Senior Executive designations make us stand apart from the typical and customary Intermediary or Business Broker. Our advisors bring proven business experience and professional credentials to each engagement. As objective advisors, our perspective builds on the subjective outlook of our entrepreneur clients and our differences strengthen the relationship. Our advisors are unbiased, and being removed from the emotional and historical perspectives of the businesses we serve, can offer the matter-of-fact tough advice and guidance needed to bring every transaction to a successful conclusion. Our clients profit from working with advisors having seasoned operating perspectives. Our understanding of your transaction issues can only come from experience in middle market companies like yours.
Deciding to sell your business is a gut-wrenching process, but making the decision is the easy part. Making the decision become reality is difficult. That’s where Certified Acquisition Advisors can help. Our Advisors come from C-Level positions and understand the decisions you face. We can speak the language and walk the talk. We want you to succeed.
YOU CAN FOCUS ON RUNNING YOUR BUSINESS. CERTIFIED ACQUISITIONS WILL FOCUS ON ITS SALE
KEY STEPS TO SELLING A BUSINESS
Selling a business is not an easy or fast process. It takes commitment, strategy and dedication. At Certified Acquisition Advisors, we work with you from beginning to end. We work with you on preparing your business for sale. In our role as Intermediary or Merger & Acquisition Advisor, we analyze your business and work to get maximum value from the sale. We qualify buyers and have non-disclosure documents signed. Precautions are taken to prevent employees, customers and competitors from learning about the proposed sale. As Intermediaries, we work with your team of professionals to find solutions to problems and eliminate roadblocks to success. Selling a business is a lengthy process and there are several key steps to consider.
WHAT WE'LL NEED FROM YOU
IMPORTANT CONSIDERATIONS WHEN SELLING A BUSINESS
- Have auditable records. The Buyer’s confidence level is dramatically increased when financial statements are “auditable” and can be reconciled with the tax returns. Don’t wait for the buyer’s CPA to find issues. Get the questions answered before they are asked.
- Have an independent valuation. Buyers won’t accept a seller’s asking price at face value. The independent valuation report can be the most important document in a sales transaction. It not only enhances the chances of selling the business but will also help a buyer formulate a fair purchase offer. In addition, it will set realistic expectations for the seller. The importance of having an independent professional valuation increases with size and complexity of the business.
- Prepare a “catalog” of company information such as policy and procedure manuals, employee manuals, strategic plan, business plan, competitor profiles, a market share analyses, SWOT (strengths, weaknesses, opportunities, threats) analysis, lease agreements, all contractual agreements, and asset lists. Assembling the catalog will help the seller prepare answers for the questions buyers will ask, will ease a buyer’s due diligence activities and will demonstrate the seller’s commitment to a successful sale.
- Prepare the “war room”, the place to meet buyers and present company information. It may be an unused office, a quiet and secure conference room or an offsite location such as your CPA’s office. To help to maintain confidentiality and not cause excess concerns from employees, it can be important to have a quiet place away from the business.
- Make sure the facility has “curb appeal” and is clean throughout. Appearances count. Consider trimming shrubbery, painting where appropriate, fixing all signage and having a clean reception area. This can help create excitement, or at least eliminate an objection.
- Have your “elevator speech” ready. The buyer will want to know you have a valid reason for selling and that the business presents future continuing opportunities.
- Be prepared to “Open Your Kimono”. Expect questions on hardware and software used, inventory turns, customer acquisition and retention, comparison of the company to the competition, growth rates of the industry and the business, barriers to entry, skill levels of employees. All questions are fair game. Being prepared for the buyer’s due diligence is critical in order to keep the deal progressing.
- Understand the tax consequences. Taxes can take a huge bite out of the money you receive from the sale of your business. Make sure you have expert advice up front.
- Continue to focus on running your business. Keep the business operating at its peak potential. If buyers sense that the business is faltering, they may walk away from the deal or may reduce their offer amount.
- Control the information flow. Maintaining confidentiality is a vital concern. If employees learn that the business may be sold, they may seek other employment opportunities. If competitors learn of the potential sale, they will increase their marketing to your customers. Customers and suppliers may also become concerned.
- Quality of buyers. It is often estimated that 90% of potential buyers never acquire a business. It will save time and frustration if buyers are pre-qualified. Just as buyers will ask why the business is being sold, the seller can ask into the reasons for buying and about financial wherewithal. Serious, qualified buyers should be willing to provide the information up front. Chemistry is important. Both the buyer and seller have to be enthusiastic about the prospects for closing the deal.
Depending on the size of the business, a multitude of documents and information must be assembled to properly plan a sales campaign and prepare an informative and effective offering memorandum. The larger the business, the larger the information needs.
VALUE DRIVERS THAT MAXIMIZE BUSINESS VALUE
Buyers look for Value Drivers which can include:
• Depth of management
• Documented systems, policies and procedures
• Diversified customer list
• Excellent reputation
• Growing revenues and profits
• Current Business Plan
• Exploitable niches
• Several more value drivers are discussed in the attachment (click title above)
KEEP YOUR BUSINESS PLAN CURRENT:
Buyers look for opportunities to enhance the business and your business plan is a great place for identifying new avenues for growth. Having a well thought out and documented "working plan" shows the buyer the business continues to be viable. Since the buyer will need to prepare a business plan to obtain any acquisition financing, the seller's plan presents a great opportunity to jump start the process. It can also accelerate the time it takes to get the buyer's financing approved.
THE VALUE OF BUY-SELL AGREEMENTS:
If a business has co-owners, it's always wise to make sure all parties understand and agree to future exit strategies and discuss their financial options well in advance. A useful exercise to force the discussion of exit options is the creation of a buy-sell agreement. Once created, the buy-sell agreement becomes a critical and strategic tool.
Fortunately, not all co-owner disagreements turn into major problems. However, if unresolved disagreements arise, having addressed critical issues in advance can help co-owners move forward.
Co-owners may have covered possible exit scenarios in their shareholder, partnership or LLC agreements. Sometimes, these agreements cover basic buy-sell issues and 'simply' state that if one owner wants out, the others can buy out the interest at a fixed price based on an appraisal or an agreed on formula. They could also state that if one party wants out, the entity must be sold to a third party. Since there are many issues to consider, creating a buy-sell agreement will cause co-owners to brainstorm the many possibilities.
It's never too late to start. Even if a sale is several years out, co-owners can avoid last minute discussions by planning ahead. Co-owners can lessen the risk that unforeseen and/or future serious disagreements will greatly diminish the business's value by having a well reasoned buy-sell agreement.
EMPLOYEE MANUALS:
When preparing your business to sell, equally important as the financial area is your Human Resources arena. To ensure to a buyer that the company and its people run smoothly, one important aspect is the employee manual or handbook. The employment area is constantly changing, whether due to Federal and/or State laws or due to the needs of your business. It is a good idea to have your rules/regulations in written form, updating yearly with any changes. Certified Human Resources, a division of Certified Acquisition Advisors can assist you with the creation/revision of a manual. A sampling of items you might consider within an Employee Manual is attached.
COSTLY SELLER MISTAKES:
Seventy-five percent of businesses that get listed for sale never reach the closing table. At Certified Acquisitions, we help you avoid common seller mistakes and increase your probability of success. Mistakes can include:
• Focusing on the past
• Not preparing an Exit Plan
• Having incomplete documentation
• Unrealistic price expectations
• Not understanding "types" of buyers
• Not having a fine-tuned "elevator speech"
• Not making a firm commitment to sell the business
TIPS FOR SUCCESSFUL SALES
As your Intermediary and Merger & Acquisition Advisor, we work with you from the time you begin until you reach your goal. Selling a business is fraught with emotions and complexities. We are there throughout the process so you can continue to focus on running your business.
Cautionary Note To Sellers
There has been much activity in the Congress, SEC and many state about the need for securities licenses to be held by Intermediaries who receive transaction based compensation when effecting a securities transaction. When seller notes are included in a transaction, a securities issue arises. If the Intermediary isn't properly licensed, there may be severe and unexpected consequences for several years following the closing of the deal. See the "Stock Structured Sales and Seller Financing" article in the Articles page of the web-site.