15 Steps to Selling a Business

15 Step Selling Process:

Step 1. Initial Contact. This is usually initiated by the seller as a result of a letter from the business broker, a referral from another satisfied seller, or the seller visiting the brokerage's website or advertising. During this call the seller asks some general questions and if they desire to move forward, the broker will request business financials, a brief history of the business and a confidential visit to the business.

Step 2. First Seller-Broker Interview. This meeting can be at the business or at the broker's office. The purpose is for the seller to provide the requested information necessary for the broker to make a business evaluation. It also is another chance for the seller to ask questions and get more comfortable with the broker his company and their methods.

Step 3. Determination of business worth. A company's value depends on many factors-such as cash flow, asset values, financial history, condition of equipment and premises, lease attractiveness, competition, potential for improvement, location, industry type and the economy, among many others. Financial statements need to be "recast" to show the maximum cash flow to the buyer. Most small businesses P & L's and tax returns do not show the true value of a business because they are prepared to minimize their taxes. We have unparalleled knowledge of real market values from selling many businesses each year. By analyzing your business and comparable sales in your industry, we can advise you on proper pricing strategy for your business.

Step 4. Second Seller-Broker meeting. At this meeting the business broker explains to the seller how he determined the value of the business and outlines his marketing strategy to sell the business. He will discuss various methods that might be used to finance the business and what preparations the seller should make to prepare for buyer meetings and what to expect.

Step 5. Listing the business. If you are in agreement with the business broker's value of the business and have confidence that our company has the proven experience to handle your sale, you will enter into a listing agreement. This is our "employment agreement" that allows us to go to work for you. It spells out everything about price and terms of your business, commission, training, non-compete and both seller and broker responsibilities.

Step 6. Professional marketing package. We will develop and executive summary for the business that explains all aspects of the business necessary for marketing. It will be released in stages to qualified buyers and other brokers that might be involved with selling your business. Confidentiality is foremost before releasing information. All buyers must sign non-disclosures and only the necessary parts of the package will be released until we know they are a viable candidates to purchase your business. The package is also valuable in getting the business pre-approved for lending.

Step 7. Pre-qualified financing. Business that qualify can be pre-approved for financing, pending finding a qualifying buyer. This is a valuable marketing tool that "draws out" the most financially qualified buyers.

Step 8. Marketing for qualified buyers. Our marketing techniques cast a "world wide net" to bring in buyers. We then go through the process of determining the real buyers for the "tire kickers" and eliminate the time wasters. We cooperate with over 1,400 other brokers that have the ability to complement the team.

Step 9. Matching buyers with the right business. Most of the buyers (80%) will buy another business even when they call on your business. That is why some times we have a buyer already waiting for a business like yours when you list. Regardless, all of our brokers are evaluating their current buyers for the one that is right for your business.

Step 10. Showing your business. Your broker will schedule a buyer meetings at a time that meets your approval. He will facilitate the meeting and make sure only the appropriated things are discussed. The purpose of the meeting is for the buyer to get their "hands around" the business and not to negotiate price and term. You will not be put on the spot to answer detailed financial questions. They are reserved for those that make an accepted purchase and sale offer.

Step 11. Getting the offer or letter of intent. If the buyer likes your business our job will be to get him to make an offer with an earnest money deposit . All offers will have certain contingencies that must be worked through.

Step 12. Negotiating the offer. Upon receiving an offer from the buyer, we will present it to you, making sure you understand it. If you choose to counter any of the terms, we will take the offer back to the buyer and try to get it accepted or get them to counter again. We will take the emotion out of the process so that hopefully we can reach a successful "win-win" negotiation.

Step 13. Due-diligence and releasing contingencies. Due-diligence is the process of proving the financial numbers to the satisfaction and any of the material facts of the business. Contingencies such as lease assignment, new lease, and financing always have time sensitive dates associated with them. We will work through each one making sure that they are released by their due date. Each contingency release moves us closer to closing.

Step 14. Inventory. Arrangements are made for the buyer and the seller to count and price the inventory (if required). If there is more inventory than stated, it is customary to add it to any note and if less it is subtracted from the down payment.

Step 15. Transferring the business. When you go to the closing the ownership of the business is actually transferred to the buyer. Each state has its own methods to assist & protect the buyer, seller & broker when transferring the business. You can use your own attorney and pay him yourself or you can use some type of trust officer like the Escrow Attorney and split the price with the seller. This trust officer is known by different names in different states. For this purpose we will use the name Escrow Attorney to describe this trust officer. 

If you decide on an Escrow Attorney, we recommend the use of experienced Escrow Attorneys (if available) to assist the seller and buyer in transferring ownership of the business. Escrow Attorneys are specialists in the field of business transfers and perform their services at very competitive rates. Some buyers and sellers choose to have their own attorneys review the details of the transaction. We encourage you to consult your attorney if you feel more secure by doing so. Please give me a call at 480-559-4300 to begin the sales process for your business today!