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Typical Seller Process – 2019

Updated from earlier post.

Everything we say is routine, turns out to have its own twists and turns.  This is true with selling a small business as well.  In this case, a small business is one that has perhaps $3,000,000 in annual sales.  It may not be so small to operate and certainly requires the ingenuity of the owner.

From the seller’s perspective a typical sale looks like this:

  • The owner elects to have me do a valuation.
  • This takes about 10 days from the time I receive all of the materials.
  • I present the owner with a value that meets standards and a marketing package/draft.
  • The owner elects to list with me (or not.)
  • The listing may be amended with an individual or company who has already expressed an interest – there are specific terms. Just ask.
  • The business is marketed according to our mutually agreed to plan and materials.
  • I vet all comers, sending materials to only those that meet certain requirements, including signing non-disclosure, do no harm agreement.
  • The owner (with me) has a phone or in person meeting with those who have a keen interest.
  • The buyer may request additional information to be sent and it is the owner’s decision whether to release it before an agreed-to offer.  The owner needs to have a certain comfort level that the buyer is not merely a tire-kicker and has capability to buy and operate.  The latter is particularly true if the owner is to be asked to finance a share of the sale.
  • The offer is presented and you agree, counter, walk away.
  • Due diligence begins.
  • Final documents are typically drafted by a neutral attorney at $1,200 a side, plus GRT.
  • You close and retire to live happily ever after!  Or, maybe you buy another business.

From the time of offer to close can be as short as two weeks if it is a cash offer.  With financing the close can be as short as 30 days.  However, with bank or other financing, in today’s environment, the process can be delayed.

Not every business sells.  Beyond marketing, perhaps the three most important features to help ensure a sale are:

  • Right price and terms
  • Well organized and managed
  • Openness with the right buyer

Typical Seller Process – 2019

August 15, 2019 blog No Comments

Updated from earlier post. First, know what you are going to do, by Joan Sotkin. Everything we say is routine, turns out to have its own twists and turns.  This is true with selling a small business as well.  In this case, a small business is one that has perhaps $3,000,000 in annual sales.  It […]

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When the Seemingly Frivolous Cost Makes Sense

April 13, 2019 blog No Comments

Martin never, ever sells anything from his upscale gallery space but refuses to close it.   Why, one wonders, does he take this position.  It happens that Martin’s seemingly excessive cost of rent with no payback guarantee’s his income.  Want to know why? The art Martin sells is one-of-a-kind woven pieces of considerable size, some even […]

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The Buyer’s Unreasonable Offer – or not

April 5, 2019 blog No Comments

No, the buyer’s offer is not even close to the asking price – why!   Sylvia has been operating her bookkeeping business as a solo-preneur for 15 years now.  She works out of her home with no staff and enjoys a 95% of revenue as cash to owner, revenue less all expenses or net income.   Her […]

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Intellectual Property – Is it or is it not?

March 30, 2019 blog No Comments

Francisco asked if his patterns, ones he designed and used in his garment-making business could be intellectual property (IP). Likely not. These are some features of IP that help to explain why not – even though Francisco had clearly designed something beautiful and something that could be reused.IP is often based on patented concepts, therefore […]

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Buying a Small Share of a Company

October 24, 2018 blog No Comments

Juan is considering the purchase of a 10% share of a business with a great business plan in a new industry.  The founder will retain 90% ownership.  Juan expects to pay 10% of the full value of the company.   A full-valuation has been done by an independent valuation specialist.  What risk might Juan have? He […]

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Earn outs – the case for most any industry.

December 15, 2017 blog No Comments

Consider this:  If the seller and buyer can not come to terms between one price or another, or a specific industry or company is flagging, or the business clients are tied to the seller, an earn out as a piece of the purchase price.  Here Holly explains the method…   What is an Earn Out […]

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Why Use A Business Broker/Intermediary

November 30, 2017 blog No Comments

This list was created as noted at the bottom and adapted to fit business intermediaries as well (see green for adaptations). The top reasons sellers hire brokers/intermediaries are these: Brokers/intermediaries know how to sell businesses; most sellers don’t 24% Seller doesn’t want to be distracted from running business 16% Confidentiality preservation and knowledge of what/when […]

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Some Nuances to Cash Flows

November 15, 2017 blog No Comments

One of the routine evaluations of business owner’s (and their consultants) relative to value to sell is cash flow. In fact it is a heart of the matter.  Often the simple cash flow example is stated this way: Cash flow to a single owner is Bottom line of the tax return or related profit and […]

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Do you want to develop more business?

November 1, 2017 blog No Comments

One of the great ways of expanding business is through tuck ins. A tuck in is the process of one business buying another business in the same or related field and merely tucking it in, much as the tail ends of the sheet you tuck into the end of your bed to have a full […]

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Excess Inventory

April 29, 2017 blog No Comments

Recently peercomps.com posted a message about excess inventory – how does it influence the value of the business for sale.  This is what they said and I agree: Some of you have asked in response to our #1 FAQ about inventory, how is “excess inventory” dealt with? As mentioned in our previous post, PeerComps “values” […]

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