FAQs About the Business Sale Process
- Can you explain the business sale process?
- As the seller, what are my responsibilities in the business sale process?
- How can I help sell my business?
- How long will it take to sell my business?
- How do we work together in selling my business?
- What happens when a buyer is interested in my business?
- How do you show my business to buyers?
Can you explain the business sale process?
The How to Plan and Sell a Business (HPSB) website has an article that should be read titled: An Overview of the 15-Step Business Sale Process.
Here is an alternative very brief overview: 1) determine the value of the business; 2) sign a listing agreement; 3) we prepare a blind description of the company for internet marketplace advertising purposes and a marketing package (known as a Confidential Business Review, CBR); 4) we confidentially market the business, qualify inquiries received from prospective buyers and obtain nondisclosure agreements before releasing the CBR marketing package; 5) we answer buyer questions and arrange meetings with serious, qualified buyers; 6) Offers are received and negotiated to the seller’s satisfaction; 7) the buyer performs due diligence concurrently with the pursuit of financing; 8) the definitive documents are drafted and final language in those agreements are negotiated; 9) closing occurs and funds are transferred to the seller; 10) Seller provides training as required by the acquisition agreement.
The HPSB article provides a 15-item list. The previous paragraph is a 10-item list. If all detail aspects of the business sale process were listed it could easily exceed 100 items.
As the seller, what are my responsibilities in the business sale process?
First and foremost, keep your focus on the business. If the operating results of the business begin to deteriorate after the business is put on the market, it can have a severe detrimental effect on the value and salability of the business. The How to Plan and Sell a Business (HPSB) website has an article titled Losing Focus – Decline in Business during Sale Process that we encourage you to read.
You also must be honest and forthright about all aspects of the business. It’s important to identify and disclose any known negative issues. By doing so, we can address them upfront. Disclosures in the front-end of the business sale process earn trust with buyers. Undisclosed problems that arise after receipt of an offer are usually deal-killers because the buyer no longer trusts the integrity of the seller. Please read Trust Issues from Inadequate Disclosures before Due Diligence on the HPSB website.
You must maintain the confidentiality of the sale. Don’t tell anyone other than those that absolutely need to know that you intend to sell your business. And, when you tell those folks, stress how important it is for them to maintain confidentiality. We recommend reading the article Confidentiality Breach and Employee Suspicion on the HPSB website.
Other than that, we need your timely cooperation when requests for meetings and/or information are made. When we list your business, we will need a high level of cooperation to prepare a comprehensive Confidential Business Review (marketing package) that will answer many of the questions buyers have. We will also make recommendations to enable you to be adequately prepared for the due diligence stage.
How can I help sell my business?
See the above answer as it relates to the responsibilities of the seller in the business sale process.
To summarize: 1) stay focused on the profitability of the business; 2) be willing to disclose any known negatives upfront; 3) be committed to maintaining the confidentiality of the sale; and 4) be cooperative whenever requests are made throughout the sale process.
To the extent possible, after listing the business and creating the marketing package, our goal is to minimize your time investment so you can keep the business operating profitably and efficiently.
How long will it take to sell my business?
There’s no good answer to this question. We’ve represented businesses which received acceptable offers within the first few weeks. Closing usually takes about 60 – 75 days from the receipt of an acceptable offer, so a sale will usually take at least 90 days.
On the other hand, we represented one business that took almost two years to finally get to closing. It was in a very difficult industry and we knew (and the seller knew) that it might take quite some time. The good news is the value of the business increased from about $2M to almost $4M during the extended listing period.
Most business sale closings will occur within in 6 – 12 months.
How do we work together in selling my business?
As previously mentioned, it’s extremely important that you stay focused on the profitability of the business during the listing period. Our goal is to make the sale of your business as painless as possible.
There will be three peak periods of interaction: 1) immediately after listing the business, we must prepare a comprehensive marketing package (Confidential Business Review, CBR) which requires your cooperation and input. 2) although we make every effort to minimize your involvement in the due diligence stage, your timely cooperation when requested is a necessity; and 3) things tend to get a little hectic as the closing date approaches and might require considerable attention to finalize the definitive documents which transfer the business.
Of course, we will also be present for all meetings with buyers and will help you understand and negotiate the price, terms and structure of any offers that are received.
We’ve been through this many times over and will keep you informed and prepared for each step of the business sale process. As our home page stresses, experience counts!
What happens when a buyer is interested in my business?
We will arrange for you to meet with the buyer. Usually the buyer wants to also see your facility, so the meeting will most likely occur in your office. If necessary to avoid employee suspicions, buyer meetings can be held after normal business hours when employees are not expected to be present. We will always be present at any buyer meetings.
On the day after buyer meetings, we follow up to “take their temperature” and answer any questions and address any concerns. Some buyers will withdraw after meeting with a seller, some will request a second meeting to gain additional insights not covered in the first meeting, and some may be ready to make an offer after their first meeting with a seller. If there is continuing interest on behalf of a buyer, it’s usually best to continue to respond to their questions on a timely basis so they can reach their comfort level with making an offer.
How do you show my business to buyers?
After qualifying a buyer and receiving their nondisclosure agreement, we review the Confidential Business Review (CBR, marketing package) with them. Buyers will usually then take some time to digest all the information provided in the CBR. After a few days, the buyer will usually contact us with questions, or they may request to meet with the seller. If we don’t hear from a buyer within a few days of releasing the CBR, we contact them for a status update. If they are not interested in the business, we ask they destroy all documentation provided to them in accordance with the nondisclosure agreement they signed.
If the prospective buyer is interested, the next step is to set up a meeting between the buyer and seller. Please see the answer to the previous question regarding buyer meetings. We will be present for any meetings with buyers.
If you have a question, send an email to firstname.lastname@example.org.