How to Sell a Business

What’s the Process?

If you are looking for information on how to sell a business, here is a quick summary of the steps that are usually required.  Selling a business is a much more involved process than selling real estate.  It takes a specific set of skills to properly sell a business to get a fair value.   

Listing your Business for Sale with a Business Broker
Meet with a reputable business broker.  Talk to them about the sales process and what they will do to help you sell your business.  Listing your business with a broker is a good decision if you want to sell your business confidentially and want to use the resources of a professional intermediary to guide you throughout the transaction.

Determine a Selling Price
One of the first things that arises when people ask how to sell a business is the listing price.  This is something that a business broker can help you with for most businesses.  For larger or more complicated businesses you can use the services of a professional business valuator to determine the selling price.  You also need to think about what you are selling – for instance, are you selling the business assets or shares (there are tax implications – most small businesses are structured as asset sales though).  You also need to think about work in progress at the time of the sale and how that will be transitioned and at what price, inventory, accounts receivable, etc.  These are issues you can talk to a business broker about as well as your accountant.  Determining a selling price and what exactly is for sale is an important step in how to sell a business.

 

Business Information Profile
Business buyers will need a brief snapshot of what your business is about – a small teaser if you will, to help them decide if they want to learn more.  A business broker with the knowledge of how to sell a business will put together this quick (and very effective) brief snapshot of your company for sale.  It is a short description with one or two lines of general financial performance.  

A business brokerage professional should also produce a more fulsome business information package, which is a more fulsome description of the business for sale.  This summary would be presented to qualified business buyers who have signed the non-disclosure agreement.

Marketing and Advertising to Attract Buyers
A business broker will plan how your business will be marketed and advertised with the end goal of achieving multiple interested potential buyers while maintaining the confidentiality of the business sale.

Qualify Potential Business Buyers
Upon showing interest in the business, a potential buyer would then have a conversation with the business broker about themselves, their objectives and what they are looking for.  The broker will ‘qualify’ and screen a potential buyer at this point.  A business buyer will be qualified on financial ability, aptitude for the business, "seriousness" and other factors.  If deemed to be appropriate, a business broker will invite the potential buyer to sign a non-disclosure agreement and then would present the potential buyer with a fuller information package on the business that would include information about the operations of the business, number of employees, a brief summary of the financial performance and any other pertinent “general” information about the business.  This general information is under strict non-disclosure rules to help ensure confidentiality of the sale.  After reviewing this information, a potential buyer may decide if they want to take their interest to the next level.  This is a major way aToronto business broker can assist you in how to sell a business.

Showing the Business to a Qualified Buyer
Presenting a business to a potential buyer is a major step in how to sell a business.  It’s important to present an accurate picture of the business – blemishes and all.  Buyers can be jaded after a while and realize that every business may have their speed bumps so it’s important to be forthright and not sweep anything under the rug, so to speak.  This is, however, the time to ‘show off’ your business’s accomplishments and showcase the hard work you have done to make it a success – this is the time to put your best foot forward and, effectively how to sell a business by being honest – which can be refreshing to some buyers.  There will be a lot of questions at this point from the buyer – try to answer everything you can, within reason though.  It’s important to remember that there is a point where a buyer needs to make a conditional offer and satisfy themselves through the due diligence process.

Getting an Offer and Accepting an Offer
The majority of business offers are conditional offers.  They are can be conditional on many different issues:  confirming some facts during the due diligence process, getting financing, assuming leases successfully, obtaining franchise approval, etc.  A condition offer is usually made with a refundable deposit (if the deal does not go through) and is usually seen as being without risk for the buyer until they waive conditions and go ‘firm’.

Due Diligence
During the conditional offer phase, a business buyer will conduct their due diligence – which is a critical step in how to sell a business.  Here, the potential buyer will confirm facts, go through financials and review the overall business operation very carefully.  If there ever was a time for a buyer to be extra meticulous, this would be it.  The role of the broker would be to help in facilitating the process and be a go-between for the buyer and the seller.  

If the buyer satisfies themselves that everything ‘checks out’ during the due diligence process and waives the other conditions the next step is to close the transaction which involves signing documents through respective lawyers and exchanging money.  After this final stage the business is formally sold and ownership changes hands.

*Source Copyright 2016. Keystone Realty Inc. 

 

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Julie Osland

Julie Osland

REALTORĀ®
CENTURY 21 Regal Realty Inc., Brokerage*
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