15 Steps to Selling your Business
There are 15 Steps in the Business Sales Process. Some of the steps occur simultaneously, so it can be a relatively quick process if both buyer and seller are motivated to perform the steps in a timely fashion. In fact, we are usually able to get to step 9 (which is introducing a qualified buyer to the seller) within 1 to 8 weeks from the start of our business sale process. An Experienced Business Broker will guide you through each step of the process of selling your company.
1. Confidential Consultation
The first step in the business sales process is considering the possibility of selling your company. For a Confidential Consultation, you don't necessarily need to have finalized the decision to sell. It's a conversation where we can find out more about your business and give you a ballpark figure on a potential sale price. Then you can decide whether to have a more in-depth discussion and potentially set up a meeting. To give you a selling price range we'll ask you some questions such as:
- What type of business do you own?
- Who are your customers?
- How many employees do you have?
- What is your role in the company?
- What is your annual revenue?
- How much do you make from the business?
- Is your business going up, down, or stable?
- Is there any particular reason why you are considering selling at this time?
- Do you have any customers that make up more than 25% of your revenue?
When we have some answers to these questions, we can give you a general estimate of what buyers might be willing to pay for your business. Then you if you aren't ready to meet right away, you can think it over and decide whether you want to pursue this further. If its only about the price, then it probably makes more sense to hold on to the business. But if you have a motivation such as retiring, relocation, other business opportunities, health issues, partner problems, etc. then it might be time for you start the sale process, which can take 3 months to 12 months to complete.
The asking price for your business will be a factor in how quickly the company sells. We can recommend a price range during this initial consultation. To get more specific, we'll need to review your financial information.
2. Review the Financial Information
Before you release your financial information to us, we can sign a confidentiality agreement. Then we'll request the last three years' tax returns and a current year to date profit and loss statement. We'll also want to understand what your total owner's income is including your salary, benefits, perks, and net income. We will take a look at the trends in your business and ask you some more questions about the company to get a full picture of the growth opportunities for the business. Other items include the approximate value of the assets of your business, including inventory, equipment, etc.
3. Provide you with a Potential Asking Price
In addition to the financial information, we want to get a good understanding of your business. We'll want to know how you compare to your competitors, what's unique about your business and what are the growth opportunities. This information will be used along with your financial information to compare your business to what other similar companies have sold for. This will allow us to give you a possible asking price for the business. We'll get your feedback and see if our price estimate is in line with what you are willing to sell the business for. Every business is unique, but buyers will compare your company to other similar companies to decide how much to offer you for the business, so we need to be within a range of buyer's expectations.
At this point, you can decide whether to move forward or not. We'll also tell you if we don't think we can meet your needs. Synergy Business Brokers only gets paid if we sell your company, so it's essential for us to feel confident that your pricing expectations provide us with a reasonable chance of succeeding in selling your company. If you decide to move forward and you have signed our Engagement Agreement, then we'll move on to the next step of the Business Sales Process.
4. Create Marketing Documents
Usually, at this stage, we have enough information to start working on the initial marketing documents. There are two documents we will need to write. The first one is sometimes called a Teaser because it's designed to give an overview of your business but not too much information that someone can guess what company is being offered for sale. The teaser is typically a one-page document. It will not contain the name of your company or a specific address. It will describe your business in general terms and provide a general location. For an example of our teasers, you can visit our Businesses for sale page.
For a Buyer to get the details on your company after they review the teaser, they will need to sign a Non-Disclosure Agreement and provide us with information on their background, skills, and financial capabilities. Once the buyer has shown that they are qualified, then we can provide them with a more detailed second document called a confidential information memorandum (CIM). This document will contain specific information about your business.
We will use our expertise to create both marketing documents, but we'll certainly need your assistance in providing us with information. We welcome your opinion and suggestions. After all, it's your business, and no one knows it better. We'll need enough information to present the company in a favorable light designed to get people interested while also providing a realistic picture of the business. In the Teaser document, we will balance providing enough information with the need to retain the anonymity of your business during the sales process. With the confidential information memorandum, we will provide more of the details about the company. This document can grow over time as we get more information and answers to questions from buyers and gain an in-depth understanding of the answers to questions that buyers have about your business.
5. Advertise & Market your Business
Synergy Business Brokers will advertise and market the teaser on your business in several ways and in many places. We advertise on Google, Facebook, LinkedIn, Bizbuysell, Wall Street Journal's website, NY Times website, Yahoo, Bing, YouTube, BusinessBroker.net, IBBA.org, Businessesforsale.com, Dealstream, Bizquest, Synergybb.com, and more. In addition to advertising, we have a potential buyer database of over 28,000 buyers that we will contact.
Synergy Business Brokers specializes in selling companies in Construction, Manufacturing, Technology, Healthcare, Distribution, Engineering, Services, and Transportation. In all of these categories, we have numerous buyers that we'll contact that include public and private companies, private equity groups, and wealthy entrepreneurs that are interested in buying businesses in these industries. We have companies in every one of these industries that are expanding by acquiring companies in these industries as well as related companies that they can leverage to grow their business. Often they can take the products or services that you have and bring them to a broader market with their sales and distribution network.
The private equity groups usually look to combine one or more synergistic companies in these industries to leverage the strengths of the multiple companies that they acquire. The wealthy entrepreneurs will seek to acquire companies that they can grow by leveraging their skills, experience, and network of contacts.
6. Buyers are contacted and sign Confidentiality Agreements
From our advertising and marketing, we always have a number of interested potential buyers in the industries that we specialize in. Before we provide details, they'll sign a confidentiality agreement and provide us with info on their qualifications. We'll start to narrow down which buyers are qualified and interested so that we can provide details.
7. Provide Details to Potential Buyers
Typically we'll need to have many potential buyers that we are in contact with before we find ones that are the right fit to acquire your company. They need to have the right skills, motivation, and want to acquire your specific company. Once they have the details on your particular location, products, or services, they may or may not be a fit to go to the next step in the Process of Selling your Company.
8. Initial Q & A with Buyers
If there is initial interest from a qualified buyer, we will then discuss the business with them and answer any questions that we can for them. We'll also get a feel for their timeframe and motivation as well as a greater understanding of why they are interested in your business specifically. When we have one that is a good fit, we'll contact you.
9. Introduce Buyers to Seller
We will give you information on the potential buyer's background and interest and set up a phone call or meeting with you. This is an excellent opportunity to find out more information on both sides. It's also an opportunity to see if you can see this person taking over your business. So while they are deciding whether they are interested, you can also make up your mind on the buyer as well. We'll do our best to introduce people that we think you will be comfortable with, but at the end of the day, it is your decision.
We recommend that you be open and honest about your business. It's good to be optimistic and positive about what your business has to offer. However, you also want to point out areas where you think a new buyer could improve on what you have done and give them ideas for potentially taking the business to the next level. Buyers will usually want to know about the expertise of your staff, your customers, suppliers, your role in the company, etc. Even though they have a lot of this information, they usually want to get more details directly from the seller before making an offer.
10. Buyers Submit Offers
Once buyers have enough knowledge and answers to their questions, we'll find out which ones are serious enough to make a written offer. On most businesses, we sell we're able to get multiple offers. We'll go over each offer with you and discuss not just the price offered but other items such as the terms of the sale, due diligence requirements, and how likely we think the buyer is to close on the deal. We will take into account whether they need financing or not and their interest in moving quickly, and more.
11. Negotiate Offers
If you have several offers that we are discussing with you, together we may decide to focus on the best one or two to see if we can negotiate terms with one that will be most likely to close on the deal and see if they can provide terms that are acceptable to you. In addition to price and terms of the payments, we'll also need to discuss how long of a transition period they want, what due diligence they will be performing, and what are their plans for running the company. We have seen hundreds of offer letters, so we have experience in deciphering the various plus and minuses of them. What is included in the sale may be a point of negotiation such as accounts receivables, payables, inventory, and whether they are buying the corporation or just the assets of the business?
12. Sign Letter of Intent
Once the terms of the offer letter are agreed to, then both sides will sign a letter of intent. The buyer will usually have a period of 60 to 90 days to complete due diligence. A signed letter of intent will stipulate whether the buyer has an exclusive period during this time where only they can pursue the business while both of you are investing time in the due diligence process.
13. Due Diligence
The amount of due diligence that each buyer requests does vary depending on the size of the deal, the buyer's background, and the available information. If there is bank financing involved, then the bank will also require due diligence information. Usually, the buyer will have their accountant review information and request information from the seller and their accountant. In addition to the financial information, they will want their lawyer to view any contracts that the seller's business has with suppliers, customers, and employees.
Due diligence is designed to confirm that the business is what was stated to the potential buyer from the seller and broker. In addition, they want to see if there are things that could cause problems for the new buyers, such as pending lawsuits or a large customer that has canceled their contract. During the review process, the buyer and their attorney and accountant will have questions. When the information is reviewed, and the questions are answered to the satisfaction of the buyer, the next step in the business sale process is for the attorneys to negotiate the purchase agreement.
14. Negotiate Purchase Agreement
More often than not, it will be the seller's attorney that will draw up the contract and send it to the buyer's attorney for their review. The buyer's attorney will go over any issues with the buyer, and usually, they will request some changes to the purchase agreement. Normally there is a give and take between attorneys and buyer and seller with any final terms to be negotiated. If the attorneys can't agree on how to move forward, then an experienced business broker will arrange a conference call or meeting with everyone involved to try to resolve any issues that are preventing the deal from moving forward. Once the issues are resolved, the final step in the business sales process is to set up a closing date.
15. Closing & Transition
Usually, the Purchase Agreement has been signed before the closing, but sometimes everything is agreed to then a closing date is set with the plan of signing the agreement at the closing. Often the closing takes place at the buyer or seller's attorney's office with all parties present to finalize the deal and exchange payment. However, sometimes the closing is handled virtually with an electronic copy signed, and the funds are paid via wire transfer to a seller's bank account.
Congratulations, the deal is closed. Now the seller will typically provide a transition period that has been negotiated where they will help the buyer take over the functions of the business and assist in understanding the customers, products, services, and employees. The transition period can vary from a few days to several years, depending on the needs and desires of both buyer and seller. If the transition period is longer than a month or two, than typically a salary is negotiated before the closing where the seller will be paid depending on how much they plan on working. Often it starts as full time and moves to part-time. Then the business is handed off to the buyer who operates the company on their own after receiving training from the seller.
Contact Synergy Business Brokers
We hope you now have a better understanding of the steps and process to sell your company. Every Business Sale Process is slightly different, and some steps in the process occur simultaneously to move things along quickly. We have Senior Experienced M&A Advisors that sell companies throughout the United States as well as overseas in the industries that we specialize in. There is no fee for our services until we have taken you to the final step and closed the sale of your company.
You can see some of the companies that we have sold at Closed Deals, and you can read some customer reviews and watch some videos at Testimonials. We look forward to speaking with you and answering any questions you might have about any of the steps in the business sales process. We take a collaborative approach in working with you because you are an expert in your business, and we are experts in the process of selling a company, so working together, we get the best results.
For your confidential consultation, please email us at [email protected] or call us at (888) 750-5950. To provide us with some information before our phone call, please fill out our quick online form. We look forward to hearing from you.