Who Knew Selling Your Business Could Be This Complicated!?

The 5 Phases of Selling your Business are much more Manageable with the help of a Qualified Business Broker

Let’s say you’ve completed all the steps to envision and plan your Life Beyond Business™ and now you are ready to sell your business – either to a third party (outsider sale) or to a key employee, group of employees or family members (an insider sale.)

The first option: Sale to a third party

St. Louis business broker & valuation firm

Metro Business Advisors is a St. Louis business broker & valuation firm

Usually, you’ll get the best overall price and the most cash at closing from a third party sale. However, a third party sale often involves you working for someone else, i.e. your new boss, and in most cases, your being completely out of the business within three years.

One thing that I can guarantee, however, is that you don’t want to sell your business alone. You will need the assistance of a business broker for businesses with revenues less than $1 million, or a Mergers & Acquisitions Advisor or Business Intermediary for businesses with revenues up to $15-$20 million, or an Investment Banker if your revenues fall between $20 and $250 million.

Each of these professionals will already have an extensive network of buyers and sellers. Plus, each expert is trained to analyze your business from a buyer’s prospective since they also represent buyers. Their connections, experience, and expertise will make a huge difference as you move to selling your business and converting your hard work into the financial resources you need to support your Life Beyond Business.

Let’s review the elements involved in the sale of a business so you can understand just how complex the process truly is. Keep in mind that throughout this entire process, you also need to continue running your business smoothly and profitably.

There are 5 major phases in preparing to sell your business:

Phase I Pre-Sale Planning

  • Review Owner’s Financial Objectives
  • Assemble Advisor Team
  • Perform Pre-Sale Due Diligence-identify any financial or legal issues that might diminish business value or increase risk.

Phase II Marketing the Business for Sale

  • Develop a Buyer Profile – a description of the most likely buyer.
  • Create “The Book;” a confidential, detailed, professional marketing piece that includes specific data of interest to a potential buyer.
  • Identify and market to potential buyers.

Phase III Educating the Buyer

  • Develop and execute Confidentiality Agreements.
  • Confirm the buyer’s financial ability to purchase.
  • Give the buyer “The Book” accompanied by any Bidding Instructions that include a deadline for the buyer’s review of “The Book” and seller’s financial requirements.

Phase IV Negotiating the Sale

  • Buyer will prepare a Letter of Intent that includes proposed purchase price, form of payment, closing date, any contingencies to closing and other miscellaneous issues.
  • Any final Due Diligence from either party takes place now.
  • Maintaining Confidentiality is essential during this phase.
  • When all the above issues have been dealt with, a Definitive Purchase Agreement is created that includes all Representations and Warrantees.

Phase V Closing the deal

  • All the final purchase price adjustments based on negotiations are made at this point.
  • Purchase and Sale agreements are finalized and signed.
  • Funds are transferred as agreed upon in the contracts.

Wow… that’s a lot to manage!

And remember, you are dealing with all of this while continuing to deal with the day to day issues involved in running your business!

Now you can see why it is so important to begin the planning process 3-5 years before your transition and why it is important to have trusted advisors and trained professionals to assist in the process!

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