The typical process for selling your business;
- Preview Financials The first step in the process to sell your business is to conduct a preliminary review of the business’s financials. This involves examining profit and loss statements, balance sheets, and cash flow analyses for the past few years. This review provides an initial understanding of the business’s financial health and profitability, which is crucial for setting expectations regarding the sale price. It also helps in identifying any financial discrepancies or areas that may require further preparation or clarification.
- Discuss Objectives Engaging in a detailed discussion about the business owner’s reasons and objectives to sell your business is crucial. This conversation helps the broker understand whether the owner wants to retire, pursue other ventures, or is being driven by personal reasons. It also helps determine if there are any specific terms or conditions the owner wants to include in the sale, such as remaining involved post-sale or ensuring employee retention. Establishing clear goals early influences the overall strategy for marketing and negotiating the sale.
- Discuss the Process The broker will explain the entire sales process involved when you decide to sell your business, from evaluating offers to closing the sale. This discussion includes timelines, potential challenges, the role of confidentiality, and marketing strategies. It’s important for the owner to fully understand the complexity and demands of the selling process to align expectations and prepare accordingly. Clear communication at this stage sets a foundation for a smooth and transparent relationship.
- Collect Additional Information To proceed, the broker will request comprehensive information necessary to sell your business, beyond just financials. This might include details about operations, employee records, legal compliance, customer contracts, and intellectual property. This data helps paint a complete picture of the business, making it easier to market effectively and address potential buyer inquiries during due diligence.
- Present Opinion of Value Using the information gathered, the broker will provide an informed opinion of the business’s value. This valuation takes into account industry benchmarks, economic conditions, and comparable sales. Presenting a well-reasoned valuation helps manage the owner’s expectations and serves as a basis for setting a competitive asking price. This step is crucial to attract serious buyers and facilitate successful negotiations when you choose to sell your business.
- Decide if Good Fit; Seller & Broker After the valuation, both the business owner and broker should assess if they are a good fit for each other. This relationship relies on mutual trust and understanding, as the broker will represent the owner’s interests in the market in order to sale your business. It’s important for both parties to feel comfortable with each other’s communication style, expertise, and approach to selling.
- Enter into a Listing Agreement Once both parties have agreed to collaborate, they formalize their relationship with a listing agreement. This contract outlines the broker’s terms of service, commission structure, duration of the agreement, and the agreed-upon sale strategy for selling your business. It’s essential to clarify all terms to prevent misunderstandings later. With this agreement in place, the broker can officially begin the marketing and sale process to help you sell your business.
This structured approach ensures that the business is well-prepared for sale and aligns both the owner’s and broker’s efforts towards achieving a successful transaction. Additional resources: https://www.tabb.org/sellers.php, https://www.ibba.org