01. PREPARE

Compile complete and accurate financials – Usually 3 Years, but the potential buyer may request up to 5 years. 

Business Valuation – There are a variety of Methods, however when selling your business you will most often use (SDE) Seller’s Discretionary Earning with a Multiple based on your industry and market or occasionally (EBITDA) Earnings Before Interest, Taxes, & Amortization if you have a more traditional top down organization with earnings exceeding $1 Million Annually. 

Due Diligence Checklist – This is a list of all of the necessary documents, standards & procedures, processes, websites, passwords, training manuals, etc. This list can get extensive, so don’t wait to get these things in order. Acquisitions fall apart all of the time due to lack of preparation. 

02. IMPROVE

Documentation & SOP – Once you’ve checked off the documentation necessary for the due diligence process, it’s time to look at what you’re missing and what is outdated. Improving this aspect of the sale will build confidence in any potential buyer. If you’re hoping to be acquired by a competitor or Private Equity firm than this is a must. 

Competitive Advantage Analysis – By knowing exactly what sets you apart from your competition, than you will not only be able to convey this to a potential buyer, but you’ll be better prepared to improve your business (and possibly your selling price) during the process. 

Value Proposition Analysis – If you’re not able to explain this to me in a 30 second elevator pitch, than you have a lot of work to do. Ideally you want to start your sales strategy 3-5 years prior to your exit. When you really know what your business stands for and its culture it will be easy to convey that to a potential buyer. 

03. OFFER

Offering Memoranda – Designed to deliver to businesses, private equity firms, and other potential buyer’s who may have an interest in your business. 

Confidential Business Profile – The complete guide to your business. Specific information about you and your business and is not given to a potential buyer until you’ve attained a non-disclosure agreement and statement of personal income. 

Marketing Implementation
– Direct Mail, Email, Online, and/or Trade Magazines, etc.
– Screen Buyers using NDA and Financial Statement
– Send (CBP) and Answer questions
– Obtain Letter of Intent (LOI)
– Satisfy pre-offer contingencies
– Obtain a Term Sheet / Asset Purchase Agreement

04. EXIT

Open Escrow / Earnest money deposit – When you’ve successfully followed the first 3 steps you’ll have a much better chance to get to this step. However, if you’ve failed to properly prepare (step 1) this is where you’ll find the most disappoint. 

Due Diligence – All potential buyers and seller’s are emotional during this process. Business owner’s try to oversell and potential buyer’s get cold feet. Hire a professional.

Contingency Satisfaction – Remember the checklist and make sure that all of your documentation is complete and accurate before hand. When they ask, you deliver. Now they’re confident that the business has been run well and are excited about the opportunity. However, the opposite is true too!

Training implementation – A new owner may ask for as much as a year or more of training after the transaction has closed escrow. Know your options and what you’re willing to do.

Enjoy life! – Know what you’re going to do after you no longer live, eat, sleep, and breath your business.