The Winning Recipe to Most Business Sales
When selling a business, follow these steps to achieve best results:
STEP 1 - PROFILE YOUR TARGET BUYER
Some businesses are best suited for passive investors, others for owner-operators working within the business. Some businesses are geographically anchored, where others are relocatable. Write a description of your ideal buyer including required skills or expertise, liquid capital, location, and participation level. This is your "target buyer". Knowing your target buyer will help you know where to find them and recognize them when they cross your path.
STEP 2 - POST ADS & BEGIN PROSPECTING
There are several excellent websites that list businesses for sale. To find the best sites in your area, simply google "business for sale" and see which sites appear. Be prepared to pay around $250/mo. for decent exposure.
Be sure the ads are confidential, meaning the reader cannot identify the business or exact location by the ad. In most cases, you will receive more inquiries by saying less in the ad than if you tells the whole story. Only tell as much information as you need, just enough information to intrigue your target buyer.
To maintain confidentiality, consider having a family member, attorney, accountant, or other trusted third-party run the ads for you as your "ad manager". This way the business cannot be traced back to you by the ad's contact name, email, or phone number.
Some businesses could be sold to one of their customers, employees, or competitors. With discretion, have your "ad manager" introduce the opportunity by emailing the ad to these prospects. The ad will serve as a filter, uncovering potential buyers while maintaining confidentiality.
STEP 3 - QUALIFY YOUR BUYERS
Require your buyers to sign a Non-Disclosure Agreement (NDA) prior to releasing the identity of the business. Get to know the buyer. Uncover how they intend to pay for the business, and their level of experience. If they intend to get financing, then expect the sale to take 4 to 12 weeks longer. Trust your gut. If what the buyer is saying sounds a little off, it probably is.
Consider preparing a memorandum, or short document introducing the main characteristics of the business. This should include a one-page snapshot of the financials. Send this information to any buyers that meet your criteria.
STEP 4 - INTRODUCE THE BUSINESS
If you're feeling good about the buyer and they are still interested in the business, feel free to arrange an after-hours tour of the physical location, or arrange an introductory phone call if a physical tour wouldn't apply. This is where you and the buyer can ask each other questions and explore a possible fit.
STEP 5 - CONFIRM INTENT TO BUY
After a tour or call, but BEFORE releasing more information to the buyer, you should require the buyer to prepare a written "contingent offer" or "letter of intent". This way, you know what the buyer intends to pay for the business. Too often, a seller proceeds for months of due diligence only to receive a low-ball offer at the end!
Have your attorney review the offer before accepting it. It's also wise to have your attorney escrow an earnest deposit from the buyer. This helps to deepen your buyer's commitment and further supports their ability to buy.
STEP 6 - CONDUCT DUE DILIGENCE
Now is the time to release detailed financials and other records, and to count inventory and other assets. Your buyer should also be working out their lending if needed. Expect the offer to change after the buyer conducts their full investigation. For example, the original offer may have assumed a certain inventory level, but after counting the inventory, you discover far more. In this case, the purchase price should be increased accordingly.
When both you and the seller are satisfied with the investigation, the buyer should escrow their remaining down payment, and both parties should sign an agreement to proceed to the closing event.
STEP 7 - CLOSE THE SALE
Closing documents should be prepared by an attorney and provided to both parties prior to the closing appointment. Chose a closing location convenient to all parties such as a bank or the attorney's office.
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