While there are certain methodology themes with brokers, each will likely have their own nuances. This is my typical means:
When a business owner says they are considering selling, my preference is to meet with them face to face. Though sometimes this same conversation can be over the phone or email. At this first encounter, the owner, hopefully, will give an overview of their business. I probe a bit to learn more and listen as best I can to remember as much as I can. (Ultimately this listening will result in a description of the business used, once edited as a piece of the marketing package.) Then, I give an overview of my background and the process of brokering.
I. Sign a Confidentiality form for the business owner and give general expectations for value and selling.
II. Gather information from the owner:
- Income statements, balance sheets and tax returns for the last three years: (Note: we only need the portion of the tax return relating to your business and signed by you)
- The most current income statement and balance sheet (year-to-date);
- Copy of the property lease, or if you own your property, a legal description as well as a general description of the real estate showing the building’s size, zoning, type of construction, special features and land area;
- Equipment listing showing key pieces at your best estimate of replacement cost (a depreciation schedule from your most recent tax return may help you);
- Copies of any supplier and/or service contracts with key vendors;
- Other specific to that business.
III. I prepare a free valuation that can take approximately 10 days from the time of receiving the information. Often this requires additional information from the owner or their accountant. The valuation is done with consideration of the specific business history, financial results in the last three years, and value of hard assets. It is calculated appropriately weighting the values, considering time value of money, capitalization/risk factors, blending three or four values, and comparing the result to current market factors.
IV. The valuation, proposed marketing package and a marketing plan are presented to the owner along with my recommended sale price, noted obstacles to selling, at times saying it is not ready to sell, and educating the owner on the whys of the considerations.
V. The owner then decides to list or not. If the decision is to go forward, both parties sign a listing agreement. Key features of the agreement are the value and other terms of the business for sale, the responsibility of both parties, the stated commission, and length of the listing.