Organizing Your Minnesota Small Business For Sale

Organizing Your Minnesota Small Business For Sale

05.08.2010 | Author: Paul Oliver | Posted in Sales

To be able to have the Sellers Video Training and entire and complete 62 document e-book together with selling forms, examples we’ve looked at along with documents: website www.minnesota-businessforsale.com

Clip originally from e-book:

Selling a business for sale is not a single event. It is a process. The term process can be defined as a course of action. Successfully selling a business requires a well-planned course of action that can help speed the transaction along. There are eight steps in the selling process. Please become intimately familiar with each one.

The time required to sell a Minnesota business, from the decision phase until the completion of the transaction, may span many months or even years. The amount of time for each phase varies from transaction to transaction. There is no typical pattern. The complexity of the deal, the size of the business being sold and the preparedness of the seller are the primary influences on how quickly or slowly a deal will progress.

The 8 Part Selling Process:

- Decision / Commitment

- Preparation

- Qualified Buyer Search

- Initial Contact and Discussions

- Negotiations and Deal Structure

- Buyer Commitment / Letter of Intent

- Due Diligence

- Purchase Agreement / Close

Step 1: Decision / Commitment

As indicated earlier, there are many reasons for selling a business. The fact that you are reading this guide indicates that you have already passed this phase. However, you should recognize that deciding to sell a business, one that you may have spent years building, is often as much of an emotional decision as it is financial. If you are still uncertain about your decision of selling, we offer one word of advice: commitment. Be as committed to the process of selling as you have been to the process of growing and sustaining your business. This is your final opportunity to add to the profits that your business has brought you over the years.

Step 2: Preparation

Understanding the actual fair marketplace value associated with the company is actually the 1st step with planning it for sale. Identifying the actual value associated with the company is not like appraising real estate where comparable homes inside a particular region bring the exact same common value. Presently there tend to be numerous specifics which impact the actual value of a company, such as: look associated with facilities, cash-flow trends, competitors, ease of accessibility as well as entry, financial trends, business outlook, intellectual property, location, longevity, loyalty associated with clients as well as workers, reputation, return on investment, product sales trends, specific permits and licenses, conditions of sale, and more.

The actual need for an skilled (as well as certified) company valuator is usually apparent. Investing in an impartial company Minnesota Business Valuation assures your potential new buyer that a thorough evaluation has already been utilized in order to quantify and justify your own asking price. As well as given that company value is ultimately in the actual eye associated with the beholder, the third-party offering document(s) are generally prepared from the buyer’s viewpoint through one of several impartial, licensed valuation companies.

Planning your exit strategy is critical to maximizing the ultimate value of your business. Issues such as these must be considered:

Exactly how much cash do you need out of the actual company?

How much cash do you need up front?

Just how much of a longer-term payout will be acceptable?

Exactly how much of your own time may you help to make available to the new owners?

An Executive Summery is going to be professionally prepared by your Business Brokers to be able to help prospective buyers acquire a general understanding connected with your small business. Unlike a small business valuation that will be developed to be able to present a fair current market value, the Executive Summery supplies simply just adequate facts to be able to accomplish your possible buyer’s primary assessment. That will certainly only often be offered to prospective buyers which match ones selling standards. It can divulge the particular name, location and general description of the small business.

Your Executive Summery should be short and concise. The more information — beyond the basics — that is given to the prospective buyer, the smaller the chances are of serious discussions. The Executive Summery is a very important marketing tool and should be used accordingly. You should unveil just enough information to build the curiosity of the buyer. When the proper level of curiosity is achieved through the Executive Summery, only then will a buyer start showing significant interest in your particular business.

Offering Documents ought to also consist of a professionally prepared Sell Side Book that intrigue buyer curiosity by featuring your own companies growth potential as well as consist of additional details and historical data on the company.

Step 3: Qualified Buyer Search

Discovering qualified buyers is a problem which each and every company seller confronts. Luckily, by now you have made the choice to engage our company in order to carry out this step for you. Our company represents a substantial collection of buyers and investors, which includes individuals and corporations. In addition to our base of 1000’s of capable buyers presently searching to buy a company, we qualify new buyers each and every week. This is carried out by means of an aggressive, private print and Internet advertising campaign.

Step 4: Initial Contact and Discussions

When you have made the determination to position the firm on the current market, you have to be diligently well prepared to be able to reply to just about any and also all inquires. This will be the time you have been seeking forward to, actually speaking with buyers interested in buying your small business.

Prospective buyers are screened by requiring they provide the following information regarding their interest and purchasing capability.

What type or industry of small business they wish to buy

Price range of the company desired

When do Buyers want to buy

Amount of cash available

Financial Summery

Executed Confidentiality Agreement

All discussions and negotiations are conducted confidentially. It dosen’t advantage none the buyer nor seller for a impending transaction to become public knowledge. Employee, competitor, supplier, bank and customer behavior and attitudes may well be impacted upon finding out the actual company is for sale.

A sample Confidentiality Agreement is illustrated and available on our website.

(Visit Our Website to receive all supporting documentation)

Step 5: Negotiations and Deal Structure

Negotiations entail a couple principal factors: 1) price and 2) terms and conditions. In the common financial transaction one is actually not more crucial as compared to the other. Please don’t focus on just the numbers or just the terms.

They are generally interrelated. For illustration, a buyer may well pay a higher price if the seller agrees to finance all or part of the transaction.

Deal structure refers to the terms and methods of payment by which the buyer will compensate you for the sale of your company. Deal structuring allows the parties to meet your needs and enable you to get the best price for your business, while allowing the buyer to meet his objectives.

The deal structure need to be equitable and make real sense for both Buyer and Seller. It must make sensible economic sense for both buyer and seller.

The Seller: You must rely on your accountant and/or professional advisors in taking into account for these financial issues:

The tax consequences related to the sale

The income necessary to support your lifestyle after the company is sold

The options with regard to investing the sale proceeds

The risks of selling your company

The Personal considerations and factors:

Your determination or desire to stay with the company

Your age and heath issues

Your plans and goals, to retire from the business.

The Buyer: the buyer’s goals in purchasing your company. Make it a point to comprehend their motivation before talking about price and terms. Businesses are usually purchased in order to fulfill either strategic or financial requirements.

Strategic Objectives Consist of:

To attain a product line

Obtain a patent or technology

Lessen competing firms

Fortify the distribution system

Fulfill a dream of owning a business

Support a new lifestyle

Financial Objectives Contain:

An satisfactory rate of return on invested capital

Increase reported profits or acquired assets

Probable risks in an acquisition from the Buyers perspective contain:

Revenue and earnings trends, discretionary cash flow, and net asset value

Strength of current or new competition

The ease a new competitor can enter the market

Product liability and potential for litigation dangers

Reliance of the business on key personnel, customers or suppliers

New or untested products or services that may may possibly not be profitable

The potential of earnings ups and downs relative to the economy

Forms of Financing: Deal structure provides the means for balancing the risks of the transaction between the seller and buyer. To the point, the greater the amount of risk the seller is willing to assume, the greater the price the buyer will probably be willing to pay. For illustration, in an all funds deal the buyer assumes all the risk while seller assume none. On the other hand, when the buyer puts no funds down but offers an earn-out and/or through unsecured notes, the seller assume all the risk while the buyer assumes none.

Between these two dimensions will be a middle ground where the risk of the transaction is situated between buyer and seller.

Other methods of payment include:

Stock: (Visit Our Website to receive all supporting documentation)

Unsecured Notes: This method of payment brings considerable risk to you, with little risk to the buyer.

Earn Out: (Visit Our Website to receive all supporting documentation)

Each of these options may have different tax implications and need to be cautiously reviewed with your financial and other professional advisors.

Step 6: Buyer Commitment / Letter of Intent / Purchase Agreement

The buyer must provide a formal Letter of Intent or purchase agreement to the seller confirming the buyer’s offer to purchase the small business. The Letter of Intent must or Purchase Agreement must be consistent with and fully reflect all of the terms and conditions previously negotiated. It must also stipulate the selling price and the structure of the financing. You will want to have earnest money to be integrated with the offer. (visit our website for sample illustration of a Letter of Intent.

It is essential to have your professional advisors or attorney review the letter of intent.

Step 7: Due Diligence

Once a deal structure is set and buyer and seller have reached agreement in principal to sell your business through a Letter of Intent or Purchase Agreement, you will begin the next phase of the sale process, known as Due Diligence. This is the period where the buyer will “inspect” the company. Depending on the size and complexity of your business, this phase can last from 2 to 20 days.

A buyer may have studied and learned how to buy a company. The depth and breadth of the Due Diligence activities may vary from buyer to buyer, but generally may consist of a review of the following:

Visit our website for a complete list of buyer due diligence categories

Throughout the Due Diligence phase it is important to be as open and thorough as possible when answering questions. Be prepared to share the special knowledge that you have obtained over the many years. Including special skills and training that may be needed to successfully operate the business in the future. An educated buyer will be thorough in inspecting the business. The better prepared the sellers are to effectively answer questions and provide essential information, the faster the deal will be completed.

Listed are the possible categories a possible buyer may want to review. Our Business Brokerage recommend sellers arrange folders with summary documents including each of the categories which may apply to the small business.

Visit our website for a complete list of categories

Step 8: Purchase Agreement / Closing

Upon the buyer’s Due Diligence is complete and all issues have been resolved, a definitive Purchase Agreement should be prepared by your professional advisor, attorney and reviewed by your CPA. An example is available on our website only to illustrate typical components. Your Professional advisor, along with your Attorney should may prepare the definitive

Purchase Agreement for the sale of the small business. Alternatively, the buyer’s attorney may prepare it, then have your professional advisor, and /or attorney review it. You only have one chance at getting it right as mistakes can be costly and side track or delay the closing.

Click Our Link: FREE Sellers Video Training and complete e-book Minnesota Business Brokers www.Minnesota-Business-ForSale.com Confidentialty is completely assured.