Selling Your Company
Tips in hiring a business broker to sell your business
"When selling your business, choosing the right business broker to assist in the process is the #1 factor for a successful sale. We suggest you interview at least 3 firms."
Jim Peddle, President, Playbook Corporate Advisory, Inc.
Steps to follow when selling your business
Determine your Objectives & Goals
Timing, valuation, listing & Marketing
The first step in selling your business is to gather the information necessary in order for us to properly assess whether you will successfully be able to list, go to market and sell your company. It's a well known statistic that up to 90% of companies never sell once marketed for sale. Using a business broker increases the chances to just over 40%. At Playbook Advisory, our goal is to close upwards of 80% of our listings and for our Sellers to achieve a sales price of 86-92% of the original listing price.
In order for our firm to hit these metrics, we complete a thorough analysis PRIOR to executing an exclusive engagement letter with our clients. Most likely, if our valuation is less than our clients expectations and the client insists on a listing price markedly higher than our valuation, we will simply pass on the listing. The realities of the market always win out over the unreasonableness of Sellers who are searching for a Buyer that will overpay for their business.
Once we complete our initial consultation, we will collect financials from the Seller for the prior three years in order to determine the level of cash flow for the business. After we analyze and recast the numbers we will meet the client to discuss a potential listing price based on our experience, similar active listings on the market and feedback from our professional network.
At the valuation meeting, we will also discuss how we will confidentially market your business to generate the most interest in your business. Our strategy is based on our experience with similar companies from prior engagements. In the unlikely event we are listing a company in your industry for the first time, we will completely discuss how and why we believe we can sell your company with our proven marketing programs. However, if our assessment is that another business brokerage firm is a better fit for the sale of your company, we will gladly either refer you or assist in finding the right company. Your needs will come ahead or ours at all times. Quite often, clients come back to us after their unsuccessful experiences with other business brokers who over promise and under deliver.
What Sellers Should Consider in Selling their Business
First, selling a company can be difficult, time-consuming and for most people a "once in a lifetime opportunity".
Following are factors to consider in Selling your Business.
- Decision to sell a company
- What is the value of my company?
- How can I increase the value of my company?
- Confidentiality and discretion
- What kind of documents are necessary?
- What buyers want to know
- The sales process
Decision to sell the company
Your decision to sell a company may be based on different circumstances. Whatever the reason is, for example retirement, changes in your private life, business-related circumstances or the wish to change your lifestyle, make sure that you have considered all other options and that you have thoroughly thought about your decision.
The decision to sell your own company may take a long time. Most people find it difficult to separate themselves from a company in which they have invested a lot of time and enthusiasm. The firm represents an important emotional value. Therefore, reconsider carefully all financial, juridical and emotional consequences before you reach the final decision to put your company on the market, otherwise you may lose a lot of time and money.
Selling a company causes not only advertising and advisory costs, but financial consequences may also ensue due to possible delays in the selling process or the lack of the owner's entire concentration on the business.
Therefore, it is important that you do make any "experiments" but that your approach is professional from the beginning and that you define your targets as detailed as possible. Once you have reached a final decision, the sales process should be carried out efficiently and at the best possible price.
Playbook Advisory (playbookadvisory.com) is your best choice to assist with the sale of your business.
2.What is the value of my company?
Try to find out what the situation of your company on the market is. It is important to picture the value of your company from the viewpoint of a buyer in order to define a realistic price.
In an initial meeting, we will help you get a clear picture about the sales price and the procedure of the sale. We will discuss the different valuation methods to determine the most realistic path to follow in order to maximize the proceeds of a sale for you.
Very often there are different opinions about a company's value. We will take the time to educate clients on how the valuation price was determined. The better informed you are , the easier it will be to reach a decision. However, in the end, it is the market that determines the value of your company.
3. How can I increase the value of my company?
What opportunities are there for you to improve your business? Does your business show as well as it should to potential buyers? Is there clutter, old equipment, non-working equipment? What will it cost to update your business appearance? Do not assume that a new owner will take care of that or of the possibility to ask for a lower sales price instead.
Make an in-depth analysis of your company. Do not forget important aspects that make your company attractive to a buyer, such as the value of client information, self-developed products and/or processes, well-maintained infrastructure, secret recipes, user-specific software programs or skilled staff. These assets are intrinsic but nevertheless important factors in whether your business will be attractive to buyers. Unfortunately, most methods of price-evaluation do not take such values into consideration, but they still may be a factor that could increase your company value.
4. Confidentiality and discretion
Confidentiality and discretion are extremely important when selling a company. Information of a planned sale may become public and rumors may lead to the loss of important customers or employees. The damage may be harmful and Playbook Advisory will stress the importance of confidentiality during the entire sales process.
With our experience, we are in position to market your business in a professional manner, we are trained to screen buyers and to protect our customers.. All potential purchasers have to sign a confidentiality agreement before they will be provided with information on the listing. No Exceptions!!
5. What documents are necessary
Please find the following checklist with documents necessary for the sale of a company:
- Year to date balance sheet and profit and loss statement
- Company tax returns filed for past three years
- List of the fixed assets
- Copy of the lease agreement
- List of loans and creditors of the company (amount, due date, repayment plan and interest rate)
- List of debtors of the company (amount and due date)
- List of current inventory
- List of pending legal disputes (if applicable)
- Schedule of your other advisors
6. What buyers should know
This question may come a little bit early to you since you have not reached the final decision to sell your company. However, it will surely help you to make the right decision. It is not only important to know, who the buyer is, but also what he or she wants to know when buying your company. The following are a few possible questions that you might be asked:
- How did you determine the listing price?
- How did you name your business?
- What is special, unique, out of the ordinary about your company?
- What are the characteristics of your products or services?
- What possible growth opportunities exist for your company?
- Who is your main competitors?
- What are the risks?
- What training and transition will you provide?
- Any key employees? Will they stay?
7. The sales process
Playbook Advisory will draw up an individual marketing plan for your company and implement the steps gradually. The buyers located with the help of that system will then be screened, we will determine and assess the buyers financial situation, risk profile, experience and proximity to the business. The next step will be to organize a buyer-seller meeting either onsite or at our Bradley Center office in Chicago. We recommend you only answer operational questions, whereas your business broker will answer questions related to company financials and the listing price, which may already be subject to negotiation.
In case the potential buyer is still interested in your company, we will receive an offer for you. Usually, such an offer depends on one or several conditions, such as the buyer's request to examine your financial documents in detail, look into your lease agreement or other materially relevant details.
We will present you all offers that we receive for your company and, together, we will consider all the pros and cons. At first sight, you might not be satisfied with some points, some may not be according to your expectations but others may be very positive.
In any case, we recommend you consider all the offers thoroughly in order to fully negotiate a final deal with the buyer. Either you reject an offer, you make a counter offer or you accept an offer.
Once you and the buyer have come to terms, we will assist with due diligence, document production and inspections of equipment. The due diligence period can last anywhere from 60-180 days depending on the complexity of the transaction and whether a bank is involved. Is there SBA financing for the buyer?
It is very important that Sellers are present during this entire due diligence process, if not, the buyer may get the impression that you are hiding something from them,
As soon as all the conditions are satisfied, a closing will occur and the Seller will begin their training and transition of the business for the agreed time period.
What does Playbook Advisory Offer Sellers?
We offer the following for Sellers;
- We are Registered Business Brokers in the State of IL. (State of IL.Broker Search)
- We provide an analysis and valuation of your business prior to listing
- We can and will create a comprehensive marketing plan
- Confidential listing term of 3-12 months
- Screening and qualification of prospective buyers
- Playbook Advisory conference rooms located at the Bradley Business Center
- Negotiations of letter of intents
- Due Diligence assistance all the way to Closing
- Access to qualified & discounted lenders and professionals including our attorney network
INDUSTRIES WE SERVE:
- Building Products
- Consumer Products
- Food & Beverage
- Industrial Equipment & Machinery
- IT Related & Peripherals
- Manufacture Rep Firms
- Medical Practices & Spas
- Plastics & Compounding
- Screen Printing/Publishing