Business Sale Process

Selling a business is very different from selling a house. You cannot put a For Sale sign in front of your business and expect it to be sold within a few weeks. Selling your business in a confidential manner takes a tremendous amount of skill, and selling it for the maximum price requires having the proper marketing, knowing the right people, and negotiating the deal appropriately with buyers, bankers, and landlords. The national average for the amount of time it takes to sell a business is 9 months. The process of selling your business would look something like this:

1. Business Valuation. The first step to selling a business is to determine the asking price. Overpricing your business not only lengthens the time your business sits on the market, but also scares away potential buyers since it is a danger sign to them that a business has sat on the market for too long. On the other hand, under-pricing your business only reduces the amount of cash you get. You need to price your business just right according to market conditions.

2. Reconstruct Company Financials. Many business owners include personal benefits in their company books in attempt to reduce their tax liability. While having a low net income might be desirable during tax time, it is undesirable to potential buyers. It takes an experienced professional to reconstruct, or recast, your company financials to show the true Owner’s Discretionary Income.

3. Marketing Packet. The next step is to create a professional marketing packet that shines the best light on your business. Buyers do not like surprises, and a well-prepared marketing packet can mean the difference between a buyer making an attractive offer and walking away. The marketing packets prepared by Roger Cox and Associates Business Opportunities LLC can consist of 15 to 20 pages.

4. Contact Qualified Buyers. Once the preparation is done, we begin to contact our database of qualified buyers. We also market your business across the nation. It is not unusual for a buyer from out of State or out of country to purchase your business. On average 70% of our buyers come from outside of New Mexico.

5. Interview Buyers. All buyers are interviewed to ensure that they have the proper background, resources, and interest to acquire and run your business successfully. Many deals fall apart at the end because the buyers were not properly interviewed at the beginning. Roger Cox and Associates Business Opportunities LLC conduct an extensive interview on the qualifications of each buyer, so unqualified buyers do not waste your time.

6. Sign Confidentiality Agreement. Before confidential information is disclosed to the buyers, they must sign a Confidentiality Agreement, commonly known as a Non-Disclosure Agreement (NDA). This agreement protects the seller in the event of litigation.

7. Give Marketing Packet to Buyer. The buyer now has a chance to review the compiled marketing packet, which allows him or her to gain a general overview and understanding of the business.

8. Seller and Buyer Meeting. If the buyer is interested after reading the marketing packet, the next step is for the seller and buyer to meet in person. The broker will be present at this meeting, coach the seller on what to say, and steer the conversation in the right path.

9. Offer and counteroffer. The broker will help the buyer draft up an offer, which includes the following: price, terms, earnest money, financing, purchase price allocation, training, non-compete agreement, any franchise transfer fee, inventory, equipments, assignment, due diligence period, closing date, etc. The broker will present all offers to the seller, and facilitate the negotiation process to ensure that both parties get what they want.

10. Due diligence. Once the offer is accepted, the buyer will begin the due diligence process. The broker will facilitate the process to provide the buyer with the information he or she needs, while ensuring that the employees do not know the business is for sale until the transaction is closed.

11. Negotiation with Bankers (if applicable). Most individual buyers are first-time business buyers, and they need the broker’s assistance in connecting them with the right banker. Having the personal relationships with the right bankers can mean the difference between having a SBA loan approved in several months and having one approved as fast as 2 weeks.

12. Negotiation with Landlord. Buyers might shy away from closing the deal if the landlord decides to give the buyer unfavorable terms. An experienced Broker can help negotiate with landlords successfully, which increases the chances that your business sells successfully.

13. Negotiation with Franchisor (if applicable). In the instances that the business is a franchise, many procedures need to be dealt with, including the franchise transfer fee, training, franchise circular, and numerous forms. A good broker is essential in facilitating a complex transaction.

14. Waiver of Contingencies. Once the due diligence period is over, the buyer signs a waiver of contingencies. After this point, the buyer cannot back out from the deal without forfeiting the earnest money.

15. Closing at escrow. A good escrow agent is important because it will make closing a smooth, pleasant, and organized process. We have found that using the services of a good neutral closing attorney helps both buyer and seller save time and money. Having a good broker at closing is also important, because the broker can smooth out the process should emotions ever run high at the closing table.