The process for selling a business can be overwhelming and confusing, and trying to sell the business yourself can keep you from focusing on the most important thing, operating your business, which is one of the many reasons why you should hire a professional business broker to help you sell your business. Let Horizon Business Brokers help you understand and guide you through the multi-step process to get top dollar for your business in a reasonable amount of time while still being able to work on and grow your business. At Horizon Business Brokers it is our goal to make you knowledgeable about the entire process so that you are comfortable every step of the way.
When selling a business with Horizon Business Brokers, our clients benefit from our industry experience, expertise in various industries, and high ethical professional standards. We promise to treat our clients fairly, professionally, and honestly because Horizon Business Brokers abide by the Business Broker Code of Ethics. Imagine your dream of finally selling your business coming true!
Here is an overview of the typical process to sell your business:
Getting Started with the Sale of a Business
Initial Consultation: We’d like to get to know you, learn about your business and why you are interested in selling your business by meeting with you. During this time, we will answer any questions or concerns you may have, explain the process of valuing a business and selling a business in more detail. We will discuss what would be needed from you initially as well as what you can expect throughout the sale process and share how Horizon Business Brokers can help you obtain your goals!
Business Data Collection: We will gather the past 3-5 years of financial data including Tax Returns, P&Ls, and Balance Sheets. We will also need copies of the current lease, an approximate inventory value, and get an equipment list with approximate values. These items will also be needed for a buyer to make an informed decision and offer as well as obtain any necessary financing. We will also need to have a general outline of the owner’s day to day role and responsibilities as well as anyone the business employs or contracts with, so we understand how each person impacts the operation of the business.
Value the Business: With the financial information and data provided, asking questions to understand the inner workings and details of the business, researching reference guides and comps databases we will determine a fair value and most probably sale price of the business.
Engage Services/List the Business for Sale: After determining a fair value and most probable sale price of the business and confirming that it is the right time for you to sell your business we will set goals and expectations for price and terms of the sale and we will sign a Listing/Sales Agreement where we will then start the process of marketing the sale of your business.
Marketing the Sale of the Business
Prepare Marketing & Advertising Materials: With the information already collected and with the assistance of the business owner in supplying anything additional that may be needed we will prepare the appropriate materials to successfully market and advertise the sale of the business.
Market Business for Sale: We will place your business for sale on innovative and popular websites among other nationally searched sites and publications. We will reach out to our very active and constantly growing database of buyers as well as our large network of partners offering your business for sale. The name and location of your business is never publicly disclosed, it is kept completely confidential until a prospective buyer has been deemed professionally and financially qualified.
Interview Prospective Buyers: We will qualify buyers to see if your business is what they are looking for, if they can manage your business, if they can afford your business and can reasonably obtain any applicable leases, licenses, or franchise agreements needed to operate the business. We will assist them with financing if needed and make any necessary introductions to attorneys, accountants or other advisors that they may need to assist them.
Showing the Business & Meeting with Buyers: Once we have identified that your business may be the best opportunity for a qualified buyer, we further discuss the possibility of a sale by meeting with the buyer. This meeting is typically a general introduction and used to answer any financial or operational questions the buyer might have. Meetings between buyers and sellers can take place at the business, outside of business hours of course unless otherwise agreed upon, at a convenient place offsite or our offices, if preferred. A buyer will certainly want and need the opportunity to review the most recent financial data available, speak and meet with the owner and tour the space a business operates from before an offer can be expected.
Offer and Due Diligence
Offer to Purchase: Once the buyer has determined that your business meets their goals and interests and that they have a sincere interest in the operation then an initial offer to buy the business may be made. We work with the buyer to help prepare an offer whether that is utilizing a Letter of Intent or a Purchase Agreement with necessary contingencies in place. We always recommend and encourage that each party engage proper counsel from an attorney, accountant and other financial advisors before completing and signing any contractual agreements. There may be some back and forth negotiations that take place until all the general terms of the purchase are agreed to by all of the parties concerned. An Earnest Money Deposit equal to 10% of the sale price or $10,000, whichever is greater is typically collected from the buyer at this stage to show their good faith and commitment in purchasing the business.
Due Diligence: This phase is the most important aspect of the purchase for the buyer. They are asked to study the business in as much detail as possible in order to satisfy themselves and their advisers that the business is what they expected. This is also a time for you as a seller to see if the buyer will be qualified and able to run your business as you have. You will be able to judge if they have the ability to operate the business. While there are certainly all cash deals made frequently in small business sales, typically small businesses are sold with the seller holding some financing for a buyer, usually around 20-30% of the total sale price. While it isn’t typical it also isn’t uncommon for a seller to finance as much as 80-100% of the sale price of the business. Providing seller financing shows your good faith in the business, opens your buyer pool, helps obtain at or closer to asking prices, and can also help offset tax liabilities from the sale. If seller financing is part of the sale you will want to pay close attention and offer any help the buyer may need in understanding the business during their due diligence. You want to have enough faith in the buyer that they will be able to operate the business and be profitable to continue the business’s success and pay any seller financing you may be offering. The due diligence period is also the time where the buyer obtains approval to take over a lease (re-assignment or re-negotiated), gain franchise approval if applicable, get any necessary bank loan approved as well as start filing for any licenses that are needed to operate the business. If the buyer is satisfied with their findings in due diligence, we will proceed to finalizing the purchase of the business and move to settlement.
Finalizing the Purchase of the Business
Assist in Resolving Any Issues: If there are any issues while performing or coming out of due diligence related to the financial health and performance of the business, operations of the business, the buyer’s ability to secure funding, obtaining the lease or franchise agreement (if applicable), or necessary licenses needed to operate the business we will do our best to work with you, the buyer and any outside advisors to resolve any issues to ensure we can proceed to settlement. It may be necessary to make amendments to the Letter of Intent or Purchase Agreement to extend due diligence or postpone settlement.
Establish Definitive Purchase Agreement: If a Definitive Purchase Agreement hasn’t been executed by both parties already (if a Letter of Intent was first established) since this can be done prior to or after due diligence we would want to finalize the purchase agreement to be signed prior to or at settlement. The Definitive Purchase Agreement is the final agreement that all parties sign which formally defines all the terms of the sale and transfers the business to new ownership.
Finalize Funding: We want to be sure that 3rd party financing and/or any personal funding to complete the purchase is in place. This is also a time where we will work on finalizing any applicable lease, franchise agreements, and license transfers.
Settlement: The settlement is the final process in a small business purchase. An attorney or attorneys for the buying and selling parties draw up and complete the documents necessary for finalizing the purchase. When all terms are agreed to, final purchase agreement and closing docs are signed, a lease is approved through the landlord of the property and signed, and franchise documents (if applicable) has been signed, the business is transferred at a formal closing with money and keys changing hands.
Horizon Business Brokers understand that sellers need answers, advice and direction before making the very important decision to sell their business. We solve those questions and provide the clear path needed. We have relationships with attorneys, accountants, and financial advisors to assist you through the entire process to make sure you are making the right decision. Selling a business is a process that is time-consuming and can be frustrating without a professional broker to guide you through it, so don’t hesitate to contact us today for a free consultation to learn how Horizon Business Brokers can help you sell a business!
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