What's Needed for the Sale
how would you go about selling your business?
You have about 3 options:
- Sell the Company Yourself
- List Your Business with the Media
- Sell Through a Professional Broker
Page Topics:
needed for the sale
pros and cons of each sale option
- Sell the Company Yourself:
You can sell your business on your own through a network of business associations and contacts
Issues:
Listing and presenting your business properly. Don't forget that you need to manage your day-to-day operations at the same time you are selling your business. Your challenge is to present your business to a vast network of potential buyers from around the region and country.
- List Your Business with the Media:
You could publish a small ad in targeted media plus list your business with online business-sell networks.
Issues:
Same as the first option. Plus, you have the challenge of keeping your sale confidential from your competition and employees.
- Sell Through a Professional Broker:
Let an expert prepare the necessary documentation and find qualified buyers. Plus arrange all related meetings to close the deal.
Issues:
Cost. Professional brokers perform services based on percentage of the closed sale. But those payments are generally re-couped since the broker understands the dynamics to maximize your value.
There are Pros and Cons for Each Method
Our advice is as follows:
- if you have a buyer or competitor who is interested in buying your business, then reach out to that person with the sale opportunity.
You may decide to use the professional services of the Novars Group to prepare your business for sale as outlined in this guide for a negotiated fee. See our professional services. - if you don't have any buyers that may be interested in your business, enter into a contract with a the Novars Group to prepare and list your business for sale.
Speed is the strategy you want to take. Move quickly before your markets or your competition negate the value of your business.
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Prepare The Sales Sheet
You need to bundle everything that is for sale and present it in a professionally designed, bounded sales sheet (what the industry refers to as the Confidential Business Memorandum).
Items included:
| company information (name and address) |
| ownership position |
| current markets |
| product sales position |
| industry served |
| competitive position |
| financial statements (for the past 3 years) |
| current balance sheet |
| asset list for sale |
| liability list to be assumed |
| current cash assessment |
| sales price with required down payment |
| financing arrangements, if any |
| an appendix to the sales sheet may be the marketing strategy that supports the sales objectives |
| other: see forms and worksheets |
The Sales Format
The industry uses a standard format for the sales presentation that is available by calling the Novars Group below.
Finalizing the Sales Presentation Sheet is critical before listing or announcing that your business if for sale. The time to complete a sales presentation can vary by company and depends on the quality of your financial statements.
- If you are not interested to sale your business at this time, it is advisable to complete a DRAFT of your sales presentation and to keep it updated annually.
Why? You never know when a prospective buyer suddenly announces their interest to buy your business. The speed to act quickly can make a difference.
If you choose to sale your business on your own,
you may request the services of the Novars Group to assemble and prepare your sales sheet for a negotiated fee. Our services will include:
- the collection and review of the required financial and marketing information,
- an analysis of your financial statements with a recasting for deriving market value,
- an analysis of your cash flow position to support your company asking price,
- and if desired, a complete valuation report by an independent valuation firm to substantiate the numbers that support your company worth.
Call us for a FREE consultation at:
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CFOne Advisory 1.571.306.3590 (DC) 1.804.527.1103 (Richmond) or e-mail your questions to: |
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Listing Your Company For Sale
Once you have completed the sales presentation, you are ready to list your company via a network of business buy/sell opportunities.
Some samples:
- online business buy and sale networks
- local online media
- regional or national online media (to reach a larger buyer network)
- business brokerage network
- business associations
- business contacts
If you use any of these options, we strongly advise you to setup a third-party contact to keep your sales intent confidential. Your competition may read the same listing services and note that you are for sale. This gives them a reason to move against your market when you need to be at market strength.
What Can a Novars Group Advisor Do
The advantage of the Novars Group is that we function as your 3rd party contact — listing and representing your interest with complete confidentiality.
We can also list your company via our extensive experience with offline and online media.
Some of our networks include:
- the NovarsGroup is a member of the International Business Brokers Association (www.ibba.com), representing some 1500+ business brokers nationwide. Our membership gives us access to a large network of prospective buyers
- our membership with Business Broker Network, a nationwide network of 450+ business brokers representing individual buyers, investment groups, companies looking for expansion opportunities, and other qualified and screened buyers.
- our membership with online listing services that cover the expansive internet network of prospective buyers
- our list of qualified buyers that have been screened and qualified for business opportunities
- by listing your business in respective offline media both locally and nationally, as needed
In addition, we can:
- target specific companies or competitors who may have an interest in your business (under complete confidentiality)
- contact equity companies that invest in business ownership with respective management teams.
- other: as directed by you
So when you are ready to sale your business, extend your reach using our network of prospective buyers nationwide.
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Market Company to Qualified Buyers
Once a prospective buyer has inquired about your business, you will present them with the Confidential Business Memorandum (sales presentation).
Screen and Qualify Your Buyers
Why? Note these important issues:
- Is the prospective buyer qualified to make the purchase? Don't waste time with individuals who lack the qualifications and financing to take over your business.
- Who should view your Confidential Memorandum? The information is extremely confidential. Don't present your company information to any person.
- Who should you allow to come visit the company? You can't risk the exposure by opening your company books unless the prospective buyer has signed an Intent to Buy Agreement.
What Can a Novars Group Advisor Do?
One of the most important services of a Novars Group is finding and screening prospective buyers.
We screen each buyer to ensure their objectives meet your objectives. We review their financials to ensure they have the capacity to enter into a buy agreement.
Our commitment is to present pre-qualified buyers who have the interest, commitment and finances to close the deal.
- The buyer will review the Confidential Business Memorandum and field some questions through the broker. They will have questions related to financial projections and the marketing strategy.
- If the buyer has interest to pursue this business, they will sign an Letter-of-Intent to Buy Agreement (LOI). They may agree to the offer price or counter-offer with another figure. The seller will have option to agree or disagree with offer.
Many times the broker will negotiate the final offer between the parties. - The LOI is binding upon completing a due diligence of the business. Generally buyers will not sign the LOI unless they are serious about completing the transaction.
However, most LOIs allow the buyer can walk away from the deal if the due diligence is unsatifactory. That is why a broker is needed to keep the negotiations on track.
The advantage of a broker is that we manage the sales process while you operate your business. Your play in the game is when the buyer visits the company to complete a due diligence.
At that time, you have a prospective buyer who is serious about buying your company.
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Complete the Due Diligence
The buyer will perform a due diligence on the business prior to closing. He or she will examine the books, check the facilities and inventory, review the records to confirm the representations made by the seller, and interview the owner on the market strategy.
Two highly important objectives must be met:
- Keep the process moving — you don't want delays. We keep prospecting for buyers until the deal goes through.
- Assigning someone as the point person to address issues between the buyer and seller.
What is Due Diligence?
| review the company premises |
| review the company operations |
| analyze the financials (generally the buyer will bring in their financial or CPAs to view the numbers). |
| they may interview the owner and current management (particularly employees or managers that will remain with the company under new ownership). But that may be limited given the confidentiality of the transaction. |
| view the assets that are for sale |
| complete a top-down review of the company |
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Close the Sale
After a successful due diligence, the buyer will move to close the deal. This is the process that involves several parties, including:
- closing attorneys:
this may involve an independent closing attorney representing both parties; usually the buyer and seller will have their respective attorneys involved to review closing documents. - financing lenders:
generally the buyer may require financing from a lender or other party. - others:
respective parties such as your broker.
The closing may require agreements on several fronts:
- how will the buyer finance the purchase:
if the buyer is doing an outright purchase (either through an investment or lender financing), this may not be an issue. But in many cases, you will find that the buyer may require seller financing.
This involves you financing a portion of the purchase under negotiated terms of 5-10 years. This is not a bad option, since it will give you the right to assume back the business if the buyer fails to meet their payment obligations. - will the seller remain with the company during the transition:
it is common for the seller to assist the buyer during the transition. This is particularly common if the business have distinct customer contracts or brand name recognition.
You need to negotiate with the buyer your role, the time required for the transition, and fee. In most cases, the seller will receive a negotiated salary or per diem fee for assistance. - non-compete clause:
in some cases, the buyer may request a non-compete clause that prevents you from competing against the buyer for a period of time (usually 1-2 years). - use of your brand name:
if you business success carries the name of the seller; i.e., Smith's Auto Parts, the buyer may negotiate a period of time where they can continue to use your name while they build up the new brand.
This may involve joint name in the brand: Smith & Wesson
to be followed by: Wesson & Smith
to be finalized by: Wesson
Again, this may involve a year or more and is generally included in the goodwill price of the company. - other:
there are many other issues that may require representation from a broker to protect your interest.
Helpful Tools
Some helpful forms business owners:
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