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, a paid professional service
- 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 excludes anyone you want to exclude.
- 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 and declaring financial capability.
- 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, including contacting landlords, and perhaps others who must agree to the transaction
- 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
Getting to Close and Professional Assistance:
Generally, I, the business intermediary, will write the offer usually as a full Offer to Purchase or Purchase Agreement (Comprehensive Agreements). Sometimes this is done as a shorter Letter of Intent or Term Sheet and followed up with one of the Comprehensive Agreement.
Further the record review or due diligence process (Review), when the buyer asks for details about the business to help assess reasonableness to buy. As the intermediary, I will assist with this process working between the parties and providing platforms for document sharing and guidance for reasonableness.
The seller may also be reviewing the credit worthiness, if seller financing has been requested to provide some financing.
During this Review, a contingency of the agreement to buy/sell, other determinations may be necessary such as allocation of purchase price, lease agreements, and plans for transition post sale.
My professional assistance is often engaged with lenders to secure proper documentation to support the lending decision.
Finally, as we approach close on the sale, a neutral escrow agent and transaction attorney, will ask the parties to sign off to close, ensuring payment for services s/he is to provide for drafting closing documents, holding and distributing funds held in escrow. (Note – from time to time there are other formats, professionals engaged in this process.
Throughout, the parties should be engaging their own accountant and attorney for professional opinions and assistance.