The process for selling your business can vary, depending on the type and size of a business. But these 9 steps are the most typical (and recommended) steps that most small and medium sized businesses will go through when selling to an external buyer (versus an employee, partner, or family member):
1. THE PLAN: Meet with an experienced Exit Strategy team to discuss your exit goals and develop a plan.
It’s helpful to use “consultative” business brokers when planning your Exit Strategy. For example, at Excellens Solutions, our consultative brokers will talk about ways to help you prepare your business to maximize its value. There are improvements you can likely make that can have a considerable impact on the value of your business.
And we’ll evaluate all of the options to ensure you meet your goals.
2. BROKER’S OPINION OF VALUE: Get an estimate of market value for your business.
If you’re sure you want to take your business to market, you’ll want a Broker’s Opinion of Value (BOV). Our BOV is complimentary for sellers ready to sell. We want to make sure the value we think we can get in the market is a value that will work for you.
To get started, you’ll answer a few questions and send us your financials, so we can estimate the current value of your business.
3. LISTING: Review the Estimated Value of your business and sign the Listing Contract.
In addition to the business itself (which may include inventory and equipment), you may want to include property or a property interest such as a lease in the sale. On average, a business may sell within 6 to 9 months, although some sales will take longer.
4. MARKETING: Marketing materials to promote your business should be prepared with your help and approval.
At Excellens, we prepare a Confidential Information Memorandum (CIM), that typically includes a summary of: the market, the company, your products and services, revenue, financials, and management structure.
We also use email notification to our preferred buyer list and online ads.
5. BUYER QUALIFICATION AND COORDINATION: Your broker should qualify buyers before you speak with them.
We will interview interested buyers for fit and financial capability, have them sign NDAs, distribute the CIM, and answer any of their questions.
Serious buyers usually want to speak with the owner, so we will set up these meetings.
Our goal is to try to get a buyer to give us a Letter of Intent (LOI) as soon as possible, so we know whether they’re a good buyer or not.
6. NEGOTIATION: Negotiate terms, get an LOI signed, and get a deposit
Once an LOI is received, there’s usually a period of negotiation on price and terms, i.e., how the price is paid, training, non-competes, etc.
Escrow is opened upon receipt of a deposit, usually 5% to 10% of the purchase price. Escrow can be through an escrow agency or one of the parties’ attorneys.
7. BUYER DUE DILIGENCE: Due Diligence and Contingencies
After the LOI is signed, due diligence begins. The goal of due diligence is for the buyer to verify that the numbers they received from the seller are accurate.
Excellens will manage this process, as well as help get contingencies resolved (i.e., assigning a lease, loan approval, etc.).
The buyer can cancel the deal up until due diligence is approved and the contingencies are resolved.
8. TRANSITION PLAN: How will you manage the change in ownership
The Seller should plan communications with employees, vendors, suppliers, and customers to smooth the transition. We can work with you to ensure you set your business up for success after the sale, to minimize the risk of post-sale problems.
9. CLOSING: The Deal Closes
Once the deal closes and money changes hands in escrow, training by the Seller should begin. The Seller should complete the Transition Communications with all interested parties.
To maximize the value you’ll receive for your business, it pays to do some Exit Planning – starting from one to five years before you plan to sell. That will give you time to make some improvements to ensure buyers see the maximum value you’ve built in the company.
As consultative brokers, Excellens Solutions has helped more than 100 sellers to maximize the value of their business for a successful sale.
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