Everything that 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 professional standards.
- The owner elects to have me work with them on an inside sale (an employee, key person, family member, etc.).
- The owner may elect to have me meet with the buyer or independently, to share information – thus keeping some distance between themselves and the buyer.
- The buyer may request additional information. It is the owner’s decision whether to release more information before an agreed-upon offer. The owner needs to have a certain comfort level that the buyer is not merely a tire-kicker and has the capability to buy and operate the business. The latter is particularly true if the owner has been asked to finance a share of the sale.
- If the seller wants to present the deal offered to the buyer, they may ask Priscilla to set a term sheet, letter of intent, or offer to sell. Otherwise, the seller can ask Priscilla to work with the buyer.
- 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.
The time from offer to close can be as short as two weeks with a cash offer. With financing the close, the time can be as few 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
- Openness with the right buyer
- Well organized and managed process
Getting to Close and Professional Assistance
When a buyer asks for details about the business, further records may be needed. As an intermediary, I can assist with this process by working between the parties, providing platforms for document sharing, and guidance for reasonableness.
The seller may also wish to review the credit worthiness of the buyer if seller financing has been requested.
During this review, a contingency of the agreement to buy/sell, other determinations may be necessary such as allocation of purchase price, lease agreements, financing, franchise relationships, and plans for transition post sale.
Clients often engage my professional assistance with lenders to secure proper documentation to support the lending decision.
Finally, as we approach close on the sale, a neutral escrow agent and/or transaction attorney will ask the parties to sign off at closing, ensuring appropriate payment for all services provided for drafting closing documents, holding and distributing funds. (Note – from time to time there are other formats and professionals engaged in this process.)
Throughout, the parties should engage their own accountant and attorney for professional opinions and assistance.