When it comes to reaching a successful closing, there are four important stages to keep in mind. In this article, we will take a look at the process and what sellers can expect. If you are planning to sell a business, it is also helpful to understand in depth what the stages are from a buyer’s perspective. 

The Letter of Intent (LOI)

The letter of intent is one of the responsibilities that your business broker or M&A advisor will take on to assist you. Your letter of intent should include the price, terms, time frame anticipated as well as other factors, such as the seller’s transition and training. Details such as what is included and what is not included in the deal should always be addressed in this agreement. 

Due Diligence 

The due diligence process is also an essential step. Your business broker or M&A advisor will guide you during due diligence. All important facts and documentation should be evaluated, ranging from tax returns and internal P&Ls to leases, bank statements, and customer/employee lists.  Buyers who do not invest enough time and energy into due diligence can often have serious regrets after the deal has closed. Be sure to take your time with this stage. 

There are other areas of due diligence that should not be overlooked including the very important NDA, financial statements, credit reports and other factors. If you want to have a smooth closing (which clearly you do!), you will want to wisely invest your time in due diligence.

Financing Approval 

Financing approval is considered your lender’s responsibility. However, if you need advice and insights, your business broker or M&A advisor should be able to assist you. You may want to look into local SBA lenders or seller financing. 

Agreement Drafting

The final agreement drafting period must be taken seriously. This is a step where your attorney will be of tremendous assistance. Your written agreement should cover a wide range of aspects including everything from payment terms to assets and liabilities. Both the buyer and seller should know exactly what the arrangement will be. 

When these four stages are followed properly, your deal should close in a timely and effective manner. If you have any concerns or uncertainties about these parts of a closing, be sure to always ask the necessary questions. 

Copyright: Business Brokerage Press, Inc.

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Most business owners don’t give a second thought to the idea of going to the doctor for an annual physical. So why do they not give the same level of care and consideration to their company? The fact of the matter is that many executives literally go decades without giving their companies a “physical.” They only stop to truly evaluate their business when required by regulations or another matter forcing them to do so.

Consider an Annual Valuation 

Let’s take a look at some of the reasons why business owners should get an annual valuation. The first issue concerns the curveballs life often throws at us. At any given time, you and your business could be unexpectedly hit with everything from partnership issues or life changes like a divorce to changes in bank relationships. When you keep careful track of the value of your business, you will know in advance how potential changes would affect you. Perhaps even more importantly, you will gain an understanding of the health of your business.  

Monitor Business Growth 

It’s critical to be aware of how your business compares from one year to the next. Are values definitely increasing? If not, you would surely want to know immediately and start making necessary adjustments. If a major problem were to surface, you would want to know about it right away so that you can take action. Otherwise, you might just let the years pass you by while this issue goes unchecked. This is the kind of data you will gain when you commit to regular valuations. 

Be Prepared for the Unknown

You might feel far from ready to sell. However, you should always be ready if the situation does present itself. What if an amazing opportunity showed up on your doorstep? On the flip side of the coin, what if a life issue like illness put you in a situation where a sale was suddenly necessary? If you are not ready both mentally and with the necessary paperwork for your business prepared, you might miss out on a legitimate opportunity. 

Statistics gathered from a prominent accounting firm showed that 65% of business owners do not know what their company is worth. However, at the same time 75% of the net worth of these business owners is tied up in their business. The problem with these statistics is quickly evident. Be sure to take as good of care of your business as you would take of yourself. 

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When you’re putting your business on the market, one of the top considerations is your asking price. Once you have a fair price established, let’s take a closer look at how business brokers and M&A advisors work with their clients to back up that price with details concerning why it is justified. 

Telling the Story

A key aspect of defending your asking price is telling the story of your business. Your brokerage professional will help you go over the details of the story so it is properly conveyed to prospective buyers. Buyers, of course, will want to understand the story behind the business so that they can understand its history and why it is for sale. You will want to feel prepared to interact with prospective buyers and how to discuss details concerning its value. 

Your business broker or M&A advisor will put together written materials about your business. These also help buyers gain clarity on the story of your business and its sales message. 

Seeing Your Buyer’s Perspective

It goes without saying that a big part of coming up with your decision of the asking price is that you want something that sounds not only reasonable but also attractive to buyers. We recommend trying to view the entire transaction from the buyer’s perspective. The buyer must be able to see how they will successfully own and potentially operate the business, as this is essential for fostering a completed deal.

Another consideration is, how will they pay for the business? In many cases, it can tremendously benefit a transaction to offer assistance in the way of seller financing. Seller financing can speed up the process, as you will not be so reliant waiting for the bank loan process, which can drag out for months. 

The Complexities of Your Asking Price 

The process of establishing and then justifying your asking price is not always simple. It is a symphony of moving parts, and it’s important to feel educated and involved in the process. Ultimately justifying the asking price is the launching point of the process, but it is also just the beginning of the journey towards the completion of a successful deal.

Copyright: Business Brokerage Press, Inc.

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Nothing strikes fear in the heart of a business owner like a legal mistake. The best way to ensure that you will avoid serious legal issues is to work with a trusted and experienced team. Otherwise, it’s easy to accidentally miss necessary steps. 

When you’re selling a business, there are a lot of moving pieces, and that means that there are ample opportunities for things to go wrong. It’s always best to be prepared. When mistakes are made, it can not only mean a significant expenditure of your time, but also your money. These kinds of issues can also bring your sales process to a total halt and perhaps derail your deal completely.

There are more than a few sellers who overlooked the importance of working with an attorney. When you are selling a business, it should come as no surprise that there is a great deal of paperwork. Your attorney will guide you to make sure that all necessary preparations have been made from a legal perspective. When your prospective buyer sees that your legal “ducks are in a row,” he or she will feel more confident in your organization and level of professionalism.

One document that often is skipped is the Letter of Intent (LOI). Sellers assume that things will move along more quickly if they forego this document. Keep in mind that the LOI truly has its place in almost any deal. After all, it not only outlines both parties’ expectations in writing, it also works to protect your best interests. Once projective buyers have signed this document, it proves they are serious about the deal. That means it is not so easy for them to walk away without consequences. 

What if your deal falls through completely? Will your buyer then reveal to the public that your business was for sale and even the potential terms that were on the table? This could indeed occur if you were not backed up by an NDA. Don’t skip this very important document either. Your business broker or M&A advisor will be very well acquainted with NDAs and guide you in the best way possible. 

Warding off these kinds of issues is one great reason to be equipped with a small team of professionals to turn to for advice. This team should include your business broker or M&A advisor, accountant, and attorney. 

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When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers.  Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look. 

1. Prepare in Advance 

Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future. 

You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers. 

2. Reveal Your Methods of Operations 

You’ll also want to demonstrate that you have a solid formula for a successful business. Buyers love to see items in place like procedures manuals, as they reveal the routine tasks necessary to run the business. Anything you can provide that will help the buyer understand how to successfully run your business will help them understand its advantages. 

3. Keep Things Consistent

During the sales process, you’ll want to be sure to maintain regular operations. If prospective buyers see any kind of dip in success, this could negatively impact your deal. Selling a business is an all-encompassing process, and it can be next to impossible to handle all the associated tasks while still putting all the necessary time and energy into your business. 

Additionally, you will want to absolutely make sure confidentiality is maintained. A breach of confidentiality, whether to employees or to competitors, can quickly sabotage your deal. There are countless instances where a deal fell through due to a breach in confidentiality. 

4. Get an Outside Perspective

What is the best possible light for your business? Since you’re involved in the day to day running of the business, it is hard to have an outside perspective. Plus having never sold a business before, it can be hard to know what buyers will respond positively to. That is a great reason to work with a business broker or M&A advisor. They have years of experience knowing what attracts and deters buyers. They will help you to emphasize your strengths and minimize your weaknesses. 

While emphasizing the positives, you will of course want to be sure to be transparent about issues affecting your business. Otherwise, the lack of knowledge can come back to haunt you. When it comes to negative factors, your business broker or M&A advisor will work to help buyers to understand how some of these can be turned into positives once they take over the business. Or they can assist you to fix some of those weaknesses before putting your business on the market. 

5. Price Your Business Correctly

It should come as no surprise that if the price you set on your business is too high, you will lose interest from prospective buyers. That is another advantage to working with business brokers or M&A advisors. They will assist you to assign a fair market value to your buyers. When the price is optimal, the strengths of your business will stand out more. While it’s essential not to undervalue your business, you also want to make sure that you don’t overvalue it either. The good news is that brokerage professionals have experience and expertise at listing the optimal price. 

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At some point, the odds are exceptionally high that you’ll need to sell your business. Today, fewer businesses are being passed on to the next generation, increasing the likelihood that you will be selling yours eventually. Regardless of your business’ stage of life, the time to prepare for its eventual sale is now.

Many believe that the most effective approach to selling a business is to avoid adopting a purely “selling” mindset and instead aim to position the business to be purchased. Let’s take a look at a historical example. In Cary Reich’s 1996 book “The Life of Nelson Rockefeller”, an insightful anecdote illustrates this point. 

In negotiations over Rockefeller’s Mesabi iron ore properties with J.P. Morgan, John D. Rockefeller, Jr. astutely replied to Morgan’s team asking for a price with, “I think there must be some mistake. I did not come here to sell. I understand you wish to buy.” Despite Morgan eventually purchasing the properties, the price was set significantly higher.

The takeaway from the Morgan-Rockefeller interaction is that adopting a “player” mindset can be crucial in achieving success in negotiations and business deals. Never neglect to realize that your mindset going into a negotiation will likely influence its final outcome. 

One of the first realities any seller must acknowledge is that selling a business can be emotionally draining. The process demands significant time and thought, and many business owners inadvertently harm the value of their business by neglecting day-to-day operations during the sales process. 

It’s advisable to delegate the heavy lifting of selling your business to experts. Most business owners have never sold a business before, and even if they have, they likely lack expertise in this specialized field. When striving for optimal results in any endeavor, seeking the expertise of professionals is always beneficial. A business broker or M&A advisor, for instance, can manage every aspect of the sale—from evaluating offers and structuring deals to vetting serious buyers.

As a business owner, your primary focus should remain on running your business successfully until the day it is sold. This approach ensures that your business maintains its value and appeal to potential buyers throughout the sales process.

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LinkedIn is a crucial platform for professionals serious about business. Its versatility allows business owners to harness its potential in numerous ways. By implementing the following tips, you can enhance your LinkedIn profile to attract more leads and expand your network rapidly.

1. Send Connection Requests

Initiate by actively sending connection requests. Most LinkedIn users understand its networking purpose, making it easier to connect with potential clients, CPAs, attorneys, and other influential individuals. Use LinkedIn’s search tool to identify and invite relevant contacts. The platform’s improved connections recommendation feature is invaluable for expanding your network strategically.

2. Build Out Your Profile

Before diving into connections, ensure your profile is comprehensive and up-to-date. Include a professional photograph or yourself, contact information, and a clear summary detailing who you are, what you do, and how you and your business can add value. 

Focus on conveying essential information succinctly to maintain interest and engagement. Users are unlikely to read long paragraphs about you and your opinions. That’s why experts suggest focusing on conveying key thoughts and carefully shaping what information is presented on your LinkedIn page.

3. Be Involved

Join groups and engage in discussions to maximize your LinkedIn experience. Look for groups relevant to your regional market or industry. Contribute valuable insights and information to establish yourself as a knowledgeable professional, attracting more connections organically.

4. Update Regularly

Regularly post new content on LinkedIn to stay visible and engage your connections. Share blog posts, professional tips, relevant articles, or updates about your listings. Ensure all your posts provide value and insight, demonstrating your expertise and dedication to your field.

5. Stay in Touch

Maintain relationships by staying in touch with your connections. Regularly reach out to inquire about their well-being and offer assistance if needed. Cultivating these connections over time can lead to unexpected opportunities and strengthen your professional network.

LinkedIn is a powerful tool for expanding your business network when used effectively. By implementing these strategies consistently, you can leverage LinkedIn to its full potential.

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