Tweet

"Selling a Small Business: a Summary of the Process"

Written by: Mark Wood

Article Overview: The Five Basic Steps in the Sales Process

"Selling a Small Business: a Summary of the Process"

Step One: Analyze the Business and Determine its Value. In this phase the business owner is usually trying to decide if this is the right time to offer the company for sale. The most important question on their minds is usually "What's my company worth?" All of the pertinent data is gathered and analyzed to determine the value and marketability of the company. Often during this part of the process areas of improvement are uncovered that can add significant value to the transaction.

Step Two: Plan and Develop the Marketing Program. After determining a range of value, the next step is packaging the company to properly present the opportunity to prospective buyers. Every business is unique. Many factors guide the development of the marketing program, such as the level of confidentiality required, the size of the transaction and the optimum buyer type which will have been identified in Step One.

A Confidential Business Review (CBR) is also an important component of the marketing package. A CBR is a comprehensive document averaging about 20-40 pages in length that outlines the benefits of owning the company without revealing its identity or location. It also should include details such as the nuts and bolts of how the business operates, its past financial performance and future projections for the business and its industry.

Step Three: Activate the Buyer Search. After instituting an Individualized Marketing program prospective buyers are screened and qualified for their ability to purchase the business. Confidentiality of the business is maintained by only releasing details of the business after a strict Non Disclosure Agreement has been signed that limits them from disclosing any information about the business or its potential sale to anyone with the exception of their accountant and attorney.

Step Four: Negotiations and Due Diligence. Most offers typically come in the form of a Letter of Intent (LOI). The LOI is a brief non-binding document that spells out the basic terms of the proposed transaction. It usually contains several standard contingencies such as the execution of a formal Purchase Agreement, the buyer obtaining financing, and the buyer completing their Due Diligence of the business. Three to six weeks is an average time frame for this phase of the process during which the business is typically off the market and unavailable to other buyers.

Step Five: Close the Deal. Congratulations, it's pay day! Your business was prepared and properly packaged, it was marketed carefully to protect confidentiality and the due diligence stage is wrapped up. If everything was done properly in the preceding steps, closing is now a formality and the business transfer is completed.

What Happens Now? Usually the seller will be available to help the new owner with their transition for an agreed upon period of time, anywhere from a couple of weeks to a number months, depending on the complexity of the operations and the experience and comfort level of the new owner.

Related Articles
  When Should You Write the Executive Summary of Your Business Plan?
  12 Steps to Implementing Anything in Your Business : Step Three: Organise your Staff and Create a Strategy
  ATTRACTING INVESTORS: A Compelling Executive Summary in 10 Items or Less
  Sales Proposal Executive Summaries: Don¡¦t ¡K Unless
  How to write a killer business plan executive summary.

Article Tags: Buy Business, Sell Business



Related Forum Posts
Blog pinging - Thanks Martin - yes, I do ping and it has been very effective. I'm currently on the first page of Google for Mastermind Group and on the second page for Selling to Small Business.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Re: Biz Plan Competition - i just wanted to say that posting Small Business Events on CanadaOne is a great resource. Thanks Julie!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Stay Employed In A Down Economy

Basic Operating Question (BOQ) for Empowerment

The Golden Rule of Communications

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.