Selling a business is likely the most important financial event in your life. It is an opportunity that rarely comes along, which is why every step of the process requires careful planning – and the expertise of a Mergers and Acquisitions adviser you can trust. Based in Dallas, The Vant Group helps business owners throughout the Southwest sell well-established companies.

Top reasons to partner with TVG:

1. Certified and Experienced Professionals

Our staff has extensive experience in Mergers and Acquisitions and business brokerage, which includes MBAs, prior business owners, licensed real estate agent and Certified Business Intermediary (CBI) accredited by the International Business Brokers Association (IBBA). Our team has over 200 years of business experience. Our experience in Mergers and Acquisitions and business brokerage, combined with our business valuation expertise, gives our clients the most professional representation possible.

2. High Closing Success Rate

We sell more than 90 percent of the businesses we engage, compared to an industry average of less than 38 percent. We achieve this success by carefully selecting our clients, and then thoroughly reviewing the goals we can help them achieve. Because we are highly selective, the clients we choose to engage receive the highest level of personal attention and commitment until the sale is complete.

3. In-House Funding Department

Once a buyer has been identified, we have the expertise internally to assist the buyer in obtaining financing to consummate the transaction. We have the unique competitive advantage in that we remove the financing hurdle which is one of the main reasons why deals fall apart. Find out more about our funding department.

4. Company Longevity

The Vant Group was started in 1999 and has provided the highest level of service to our clients. 

5. Company Size

With ten (10) professional, experienced team members, we are one of the largest mergers & acquisitions and business brokerage firms in the Dallas/Fort Worth area.

6. Strict Confidentiality

Public knowledge of a business sale can affect the attitudes and actions of customers, competitors, employees, and suppliers, which can subsequently affect the value of the company. That is why all of our prospective buyers are first carefully screened, and then they sign a non-disclosure agreement before any confidential information is shared.

7. Qualified Buyer Database

We pre-qualify business buyers through our stringent Buyer Registration system. Our buyer database contains thousands of individuals, corporations and private investment groups actively in search of well-established companies in Dallas/Fort Worth area.

8. Extensive Marketing to Multiple Buyers

Our staff of professionals uses all available resources to maximize market exposure while preserving our client’s confidentiality. We leverage multiple marketing vehicles including our existing buyer database, targeted buyer searches, cooperative co-brokering groups, trade journal publications and internet advertising. We make a strong effort to attract multiple prospective buyers with the goal of creating a competitive environment focused primarily on value, rather than price.

 

Selling to your partner(s) or employees is another viable exit strategy. Since partners and employees work in the business daily, they understand the value proposition of the business better than non-insiders thus these types of transactions could yield a higher value than other exit strategies.

Existing Employees

Many business owners feel that the best prospect for their business will be within the employee ranks. This can be a viable, positive method of exiting while also rewarding loyal employees with ownership. It is normal to think that employees would be a natural choice, but there is a saying about people in business: “There are leaders and there are followers and very few followers ever become leaders.” After an employee and his spouse discover the reality of the down payment, the monthly debt payments, and the overall responsibilities involved in ownership, the employee usually remains an employee; however, this is still an excellent avenue to pursue especially if you have a management team in place.

Partners

Partner buyouts are the most easily financeable transactions of all, assuming the buying partner acquires 100% of the outstanding shares of the company. The buyer can often initiate the transaction for little to no money-down, based on the equity currently held in the business

Functions of the TVG

• Consultation with seller to learn more about the goals of the Seller.
• Provide an independent business valuation
• Development of marketing plan and marketing package (if applicable)
• Assistance in determining asking price and deal structure
• Coordinate and facilitate all buyer / seller meetings
• Additional consultations with buyer / seller
• Assisting buyer (if applicable) with preparation of offer to purchase or letter of intent and presentation to seller
• Act as a buffer between buyer / seller during negotiations
• Offer follow-up with buyer / seller
• Meetings with buyer / seller to coordinate buyer due diligence
• Consultations with buyer / seller and outside advisors
• Assist buyer in obtaining financing (if applicable)
• Coordination of closing and other documentation with attorneys
• Consultation with parties regarding transfer of licenses, utilities, etc.
• Assist with and coordinate the closing and subsequent transfer of the business

Fees

Though fees vary on the size of the transaction, on all transactions there is a preparation fee and a success fee at closing.

Placing a market value on a business will be the most important and perhaps most difficult part of the selling process. Prospective buyers will make the decision to purchase a business based on the potential future upside, but will establish a price on the business based on past and current performance. Fortunately, performance is well documented in company financial reports from which a business valuator can use definitive ratios to determine net worth. There are probably as many formulas to develop market value as there are different types of businesses. In the final analysis there is one definitive determinant of business worth, “The amount a willing and educated buyer is willing to pay for a business.”

When you are ready to begin the valuation process, it is important to remember that a Business Intermediary or a business valuation service is the best bet in determining a value that is more in line with what the market is willing to pay for the business. A professional Business Intermediary is in the marketplace working with buyers and has his pulse on market conditions that affect values. It is necessary to meet with a business broker, who will in turn confer with the seller’s CPA. The Business Intermediary will then use comparable business sales, financial information and present market conditions to determine market value.

Objective factors that affect sale price:

1. Owner’s Discretionary Cash flow (ODCF)
2. Asset value
3. Inventory
4. Accounts Receivable (A/R) and Accounts Payable (A/P)
5. Leverage
6. Asset vs. Stock
7. Years in business
8. Employees
9. Reason for Selling
10. Length of training
11. Business type

Once analysis of the financials statements has created a base of value, there are many subjective aspects that will adjust the sale price up or down. The objective and subjective factors are intertwined in establishing the ultimate sale price. 

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1. Owner’s Discretionary Cash flow (ODCF)

The largest component of determining value is deciphering how much money the business makes. Different valuation methods view cash flow with many different meanings. When dealing with small businesses the description of Owner’s Discretionary Cash Flow (ODCF) will be used in most valuation models. Most small business sale prices are determined by using a multiple of cash flow. If a prospective buyer cannot receive a good return on his investment for a business purchase, the business price is too high. If the business is purchased using leverage and the ODCF cannot cover the debt payment, the business is most likely overpriced and will probably not sell. In real estate, a buyer’s main focus is a location, while in business transfer it is ODCF.

2. Asset value

Many buyers want to know how much of the business price is allocated to what they can feel and touch or hard assets. Normally the higher the value of the asset, the higher the sale price. Conversely, outdated, non-working duplicate assets do not add value to a company, rather they detract from it. Just as important as getting a business valuation, getting an equipment appraisal could assist in the valuation of the overall business. A business owner needs to ensure that his business does not become “upside-down”, when his asset value is much higher than his ODCF, since that would only yield him a sale price driven primarily by his asset value. Assets are key to the operation of any business, yet if an owner is continually building an asset base and not consequently building the sales and cash flow, he is hindering the ultimate sale price.

3. Inventory

Inventory value falls under the same heading as assets, which are items a prospective buyer can feel and touch. Inventory, similar to assets, is essential to the operation of a business, yet too much inventory can have a negative effect on sale price as well. A sale price can be determined with or without inventory value, but either method will require an inventory count before the closing date. Dead and obsolete inventory will not add proportionate value since it will not be counted at closing and therefore deducted from the ultimate sale price.

4. Accounts Receivable (A/R) and Accounts Payable (A/P)

When a small business is valued it is normally based from a multiple of ODCF with hard assets and inventory included in the sale price. When A/R and/or AP are included in a business sale, the price derived from the earning multiple will be adjusted up or down based on the net values of the A/R and A/P. When a buyer purchases the accounts receivable, the sale price increases dollar for dollar above the predetermined sale price from a multiple of ODCF. Normally, there are provisions in the contract for any uncollectible A/R that either affects the seller carry-back note (if there is one) or a refund of a portion of the sale price. If a seller does not want to hassle with adjusting A/R after closing, a buyer can take a chance on A/R by paying a predetermined discounted percentage. Conversely, accounts payable assumption decreases the business sale price dollar for dollar. Example: $1,000,000 all cash sale price $ 800,000 cash at closing, $ 200,000 assumption of A/P.

5. Leverage

The terms of payment on a business sale will have a major impact on both the sale price and how long it takes to sell. A business that can be purchased using a high leverage factor generally will be worth more than one that requires all cash. Funding options can include conventional financing, SBA financing, seller financing, and all cash.

6. Asset vs. Stock

The two types of business transfer are the purchase of a company’s assets or the sale of its stock. In the small business arena, a stock sale is usually most beneficial for a seller, while an asset sale is most beneficial for a seller, while an asset sale is most beneficial for a buyer. Determining the type of sale will have a direct impact on the sale price with an asset sale usually commanding a higher sale price than a stock sale.

In an asset sale, the buyer primarily buys the assets of a corporation only (fixed asset, goodwill, non-compete, etc). The advantage to a buyer is the ability to allocate the sale price with a high asset base that will allow for a higher future deprecation schedule. In addition, by purchasing only the assets, the buyer does not assume any of the corporation’s legal liabilities.

In a stock sale, the buyer primarily purchases the stock of the corporation. The advantage to the buyer is the ability to buy the total package including contracts leases, permits, and licenses that are in the corporate name. The disadvantages as previously mentioned are the legal liabilities and lack of depreciable asset base. The tax advantages to the seller in a stock sale are usually significant, which is why most business sellers prefer this method of sale.

Since buying a business goes beyond the financial statements, there are several factors that increase and/or decrease the value based on financial analysis. The most difficult part of convincing a prospective buyer to pay for the goodwill (subjective) portion of the business can be validated by placing economic values on intangibles such as: employees, company longevity, patents, customer base, and of course the biggie, cash flow.

7. Years in business

Longevity equals less risk. We have observed that after ODCF and fixed assets, the number of years in business is the second most important factor for buyers. Since the purchase of a business is one of the hardest decisions one will have to make, there is the need to eliminate as much uncertainty as possible. All things being equal, a fifteen-year-old firm will sell for more money and more quickly than a five-year-old firm with similar financials.

8. Employees

The old adage, “Employees are a company’s most important asset” could not apply more than during the business transfer process. Quality, quantity, and tenure of employees will have a direct affect on not only the value of a company but also on the probability of the business being sold. The strength of the employee pool stars at the top with a solid management team and/or right-hand person. Buyers will be keenly interested in determining which employees will be able to help him learn the business and survive the transition period. Businesses that have the owner as, “chief, cook, and bottle washer” will not command the price and attention of a company with a solid management team in place.

9. Reason for Selling

A difficult psychological obstacle for a buyer to understand and believe is the seller’s reason for selling. A justifiable, acceptable reason for sale will increase the probability of sale for the highest justifiable price. The top reasons for buyers are retirement, fatigue and sickness. The most common reason is probably fatigue, which usually occurs between 7-12 years of ownership. The least acceptable and most problematic reasons for buyers include: inability to handle the business, preference for another business, or problems with employees.

10. Length of training

It is standard procedure that a seller will be required to remain with a company for a period of time to train the new owner in the operation of the business. The length of this period will vary in part on how well the owner has distanced himself from the business in the years before the sale. As previously stated, if the seller is the “chief, cook and bottle washer” then it is a safe bet that the transition period will be longer since the seller is the only one with the important knowledge. Similarly, if the business is technical and dependent upon the owner in the operation, the training will likely last for an extended period.

Unless the aforementioned circumstance characterizes your situation, the training period will likely be only a month or two. Usually, this short period is included in the sales price with the ability to negotiate additional training. It is important to remember that some buyers will want the seller out of the operation as soon as possible to be able to fully assert themselves in their new roll. Conversely, other buyers will want to keep the seller around for as long as possible as a safety net. It is good procedure to structure additional time after the original period for phone consultation or monthly meetings. This additional consultation period adds a comfort level to the new owner and as such, will often shorten the time the seller might otherwise be required to stay.

12. Business type

Different types of businesses are more attractive than others to prospective buyers. Some people prefer a Ford to Dodge or a two-story home to a ranch style home. There are different buyer preferences for business types as well. A manufacturing buyer would not be comfortable behind the counter in a retail store and vice versa. There is a well-defined hierarchy of desirability in the different types of businesses. The four primary types of businesses listed in order of desirability are: Manufacturing, Wholesale, Service and Retail.

Factors that increase business value

1. Organized Up-to-Date Financials

If the financial workings of a firm are not organized within acceptable accounting practices, a buyer will be very reluctant doing his due diligence. There should be an organized consistent flow of revenue and expenses flowing from invoice to general ledger to financials to tax returns. In addition, owner perks should have an organized provable paper trail.

2. Annual Increasing Sales

Even a small increase of 5% a year in sales shows a completely different picture than one of an equally decreasing annual amount. Lenders and buyers will be equally concerned if sales and or profits are sliding even slightly.

3. Key People

One of the most important elements to insure buyer’s success in the first years of new ownership is to have key employees staying in the firm. They will have knowledge of internal operations, products and services and also be involved in continuity of relationships with clients and suppliers. Often, the continued tenure of employees will be the difference between success and failure of the new ownership, therefore, positions influence value.

4. Systems and Structures

Procedural and training manuals in a business organization are signs of a strong firm. The ability to not only replace lost workers, but also get them trained in a minimum of time is of paramount importance to a new buyer. Replication of the business model with systems and structures in place is what should be strived for to achieve.

5. Formal Business and Marketing Plans

Written, and more importunately used, business and marketing plans are a sign of an organized business and a can provide a good roadmap for a new owner to follow. They can be a tool for the whole firm to use to get to the next business level.

6. Organizational Charts and Job Descriptions

A clearly defined organizational chart that shows the names, basic job functions, and time in grade in the firm and industry should be a part of the Business Plan. It should include thorough job descriptions for all employees including the owner. As part of the due diligence process, a purchaser should be able to read and basically understand the general functions of all employees.

7. Strong Sales Force

How effectively you attract customers equates to immense value in a business. A trained sales force is a tool that a buyer can count on to help in transition and to ultimately increase sales.

8. Cross Trained Employee Base

Most small closely held firms have employees that must wear many hats. Being effectively cross trained in related duties insures continuity of operations during difficult staffing situations.

9. Owner Removed from the Business

When an owner has virtually removed himself from the daily operations and customer relations in the years just prior to a sale, he has created an environment that can continue easily without his presence. If owners are deeply involved in the day-to-day running of the business and have close relationships with customers the business will likely suffer the negative effects of owner displacement.

10. Reduced Owner Perks

It is a lot cleaner for a buyer to take over a company in which the cash flow is in net profit and owner salary. When perks are “embedded” into the financials, there is more importance placed on due diligence and recasting.

11. Diverse Long-Term Client Base

A large number of long-time, loyal clients, none of whom individually account for more than 20% of revenues, is ideal for buyers as well as lenders.

12. Intellectual Property

Even without patents, copyrights, and trademarks, many businesses have specialized knowledge or services unique to that operation. This collection of knowledge is an important asset of every business enterprise.

13. Proprietary Products and Processes

Having a property product or a copy written process is viewed as a key business asset that can add a lot of value. This type asset is not prevalent in many small businesses, and those having them will carry a premium in the market place

14. Good location

Even in service and distribution type firms, location is important for most businesses. Convenient arterial flow to customers and proximity to suppliers are often important to success. Frequently, company location is key to employees that live near the workplace for whom relocation of the business is monetarily unfeasible.

15. Well Designed Website

Firms that show increased business activity from the aid of a well designed website have an important intellectual asset. The existence of this tool and the ability to attract hits over recent years is an effective tool for prospective buyers to measure.

16. Good Internal Layout

A business internal operation should “flow” from workstation to workstation. The tour of the facility by the owner should effectively show how the business work moves though the organization.

17. Good Overall Appearance

A business should have both external “curb” appeals and an orderly professional inside appearance. Clean, organized offices and warehouse areas make a big impression on potential buyers.

 

Factors that decrease business value

1. Incomplete or Inaccurate Records

If financial records are not organized and maintained in keeping with acceptable accounting principals, buyers and their support group will be unable to effectively determine the owner’s cash flow of a business and subsequent value. This not only makes a business less valuable but bad records usually make a firm unsalable.

2. Un-provable Owner Perks

Owner perks usually fall into the “grey” area of accounting. When perks are embedded and cannot be shown with a clear paper trail, the buyer faces the dilemma of whether to overlook the issue or move on to the next buying opportunity.

3. Unreported Cash

Although it could be perceived as a source of cash flow, unreported cash cannot be used in the calculation of a business sale price. In fact, unreported cash is often thought of by buyers as a fraudulent activity possibly as a foreshadowing of other illicit issues.

4. Bad Attitude of Seller – Unmotivated Seller

If a seller is not cooperative, or is not forthcoming with information or willing to answer buyer’s questions, they are often perceived as unmotivated. Unmotivated sellers are a common deal killer for prospective buyers.

5. Questionable Reason for Selling

It is very important that buyers understand the true reason why an owner is selling. When a seller is 60 years old and ready to retire, the buyer has a good feeling. If the seller is 45 and only owned the business a few years, buyers have reason for being suspicious of undisclosed issues with either the business or the industry.

6. Large Working Capital Needed

In a scenario where significant cash and accounts receivable are needed to operate a business, this needs to be figured into the sale price. Often businesses are priced with no attention to the funds needed for operation. It is important for purchasers to accurately measure the average working capital needed to resume operations.

7. Poor “curb appeal”

If the first sight of the business is unattractive or unprofessional looking, a negative perception could be given to the buyer. A poor outward appearance could be a sign of other potential issues.

8. Bad location

Locations have utility to all business operations. If a firm does not have good ingress and egress, proximity to clients and suppliers, operations could suffer.

9. Large Customer Concentration

Third party lenders are so concerned about this issue that they have a special set of valuation formulas to determine the effect of a loss of a key customer that accounts for more than 20% of total revenues. Businesses with a diversified customer base will see a premium over those that don’t in the eyes of a buyer and a lender.

10. Week Infrastructure & Lack of Key Employees

Key employees and good systems are crucial to the success of a new owner. They provide continuity during the transition process. Owners that are heavily involved in daily operations are hard to replace and can have a negative impact on the value of the business.

11. Inconsistent Yearly Financial Performance

This is a red flag that all buyers and lenders will focus on. Inconsistent financial performance is often an indicator of an unsolvable business problem. Buyers are usually advised to move on to the next buying opportunity.

12. Declining Sales

Even a slight annual decline in sales shows a completely different picture than a slight annual sales increase without a valid reason. Lenders and buyers will focus on the reason for the decline which could be a sign of trouble for the business.

13. No Sale Force

The lack of a sales force is a sign of a firm that might not be able to weather a sales downturn or other business issues. It’s important to have a plan for continually obtaining new business.

14. No Formalized Business and Marketing Plans

The absence of formalized business and marketing plans are an indication of an out-of-date business operation. A firm without this type of direction is usually dependent upon its existing client base and does not have a clear path for growing and improving operations. Plans provide a way to measure progress.

15. Poor/unclean Appearance

If a buyer sees a messy and unclean place of business he may perceive that the business is not well run.

Before the selling process begins, it is important to determine from where the prospective buyers will come. A few questions to consider are: Will the buyer have industry experience? Will he be a first time buyer? Will he need financing? A TVG Business Intermediary will be able to provide a preliminary idea or priority list of the most likely type of buyer for a business. By understanding the types of buyer, a seller will be able to anticipate the buyer’s different financing needs, geographic constraints, and list of priorities.

The different buyer pools are as follows:

1. Corporate America, First-Time Buyer

According to the nation’s largest Business Intermediary exchange, Business Broker’s Network, approximately 70% of the buyers for small businesses are first-time buyers. The majority of these buyers are coming out of corporate America. This type of buyer generally needs some type of financing and will either be a victim of corporate downsizing or will have voluntarily opted out of the corporate rat race. It has been our experience that he will not have a specific target industry that he is searching for. Usually what determines the ultimate business he purchases will be determined by a combination of good cash flow, location and availability.

A word of caution about buyers that are still employed in corporate America; they are rarely in a position to make a quick decision if any decision at all. Often the employed executive is waiting to uncover the business of his dreams and then decide if he is really going to give entrepreneurism a try. Be cautious with a buyer that is still in corporate America since he may very well be a dreamer rather than a doer.

2. Competitors / Vendors / Synergistic Buyers

Due to confidentiality, competitors/vendors should be approached with extreme caution. Even though either group may be the best buyer candidate, in many cases they should be the last prospects to approach. In all due respects to signed confidentiality agreements, by marketing your business you are still exposing yourself, and in this case to the people in the best position to harm you in the marketplace. You should make sure that the competitor/vendor is well aware of the exposure, and to keep a tight rein on company information. It is a good idea to proceed on a prospect-by-prospect basis when contacting competitors or vendors.

There are some advantages however in selling to either competitors or vendors. The decision process and due diligence period can be most efficient since the acquiring company knows the market and the industry. These buyer types are often only interested in verifying basic company information and determining if there is a synergistic fit. In addition, financing difficulties are not as prevalent as with other types of buyers. The seller may not be required to offer any form of owner financing since the acquiring company may have that basis covered from the beginning.

Most often, we have found that business-to-business purchasers are not always the highest paying buyers because they are unwilling to pay the highest justifiable price for a business. Often these buyers would rather set up their own facility with in-house assets before paying top price for an ongoing concern that includes substantial goodwill value. Many times we have seen owners with dollar signs in their eyes visualizing selling to a large company in their industry with deep pockets seeking to penetrate the seller’s market. Although this situation has certainly occurred, especially during consolidation periods in an industry, it is not the norm.

3. Existing Employees

Many business owners feel that the best prospect for their business will be within the employee ranks. This can be a viable, positive method of exiting while also rewarding loyal employees with ownership. It is normal to think that employees would be a natural choice, but there is a saying about people in business: “There are leaders and there are followers and very few followers ever become leaders.” After an employee and his spouse discover the reality of the down payment, the monthly debt payments, and the overall responsibilities involved in ownership, the employee usually remains an employee; however, this is still an excellent avenue to pursue especially if you have a management team in place.

4. Partners

Partner buyouts are the most easily financeable transactions of all, assuming the buying partner acquires 100% of the company. The buyer can often initiate the transaction for no money-down, based on the equity currently held in the business. Find out more about how TVG can help facilitate this transfer.

5. Investment Groups / Investors

Also referred to by other names, such as Private Equity Groups etc, these firms purchase businesses as a “portfolio” item for their investors. The investment group at its core is a pool of high income individuals that join together to hedge risk by purchasing several businesses for the group’s portfolio. This type of buyer is going to be interested in both a superior investment as well as a strong management infrastructure. In many instances, the investment group is only interested in the cash flow and has no interest in running the business themselves. In this situation the seller may be in good position to stay on as a manager as well as receive an income stream from the sale. It is safe to say that if a business does not have management in place, the investment group will either not be interested or will drastically discount the deal.

 6. Intergenerational buyers

Sometimes the best buyers are relatives. It should be noted that unless certain procedures are followed, intergenerational sales could be difficult. It is advisable to hire a valuation company to set the sale price in an owner-to-family member transfer. Find out more about a business valuation. If a valuation company as an unbiased third party establishes the price, chances are this will not be an issue either before or after the sale. The valuation company selected should have a good reputation as a specialist in business valuation, and as such, will include documentation for the findings. After the price is established, the family member should be handled like any other prospect.

A frequent problem that occurs is that a family member can take extensive time to make up his mind about purchasing the business. A good way to handle this problem is to give the family member a first right of refusal for a defined time period. If the family member exceeds this time period, he should be ready to compete with other buyers for the business. Also, the family member should use a different CPA and attorney than those used by the family in the business to handle his side of the transaction. If ground rules are established from the onset, there will be fewer problems and hard feelings between family members as the deal progresses.

7. Foreign and Public Companies

Although not as prevalent as some of the other buyer pools, this pool cannot be overlooked. Foreign and public companies are rare in the small business acquisition arena. A seller should have a solid support team before attempting negotiations with foreign or public companies. Much time can be wasted in understanding the buyer’s parameters and the exchange of information. Transactions of this type take significant time and often end in frustration.

1.) Initial Meeting

Business Intermediaryexplains what’s involved in the selling process. Questions of the seller are answered regarding the business operation, history and future prospects of the seller’s firm.

2.) Review Financials

TVG team begins “recasting” technique to determine owner’s discretionary cash flow of the company. Spreadsheet analysis is then used to compare the three previous years of financial operations and the current year to date.

3.) Determine Value

Once the financial review is complete the TVG team works to assign applicable multipliers to the owner’s cash flow and to determine the applicable deal structure. Care is taken to use multiple standardized valuation techniques to determine a recommended selling price to the seller in addition to researching industry comps.

4.) Engage TVG Services

The TVG intermediary preliminary fills out the engagement agreement for the seller’s legal council to review with the appropriate monetary amounts and any conditions agreed upon. The seller’s attorney will usually have comments for the seller’s consideration before signing.

5.) Gather All Necessary Documentation

After the engagement agreement is fully executed, the next step by TVG team members is to obtain a comprehensive list of documents from the seller to develop the marketing package for purchasers. A business questionnaire, fixed asset list, copies of building lease and other documents are requested by the Business Intermediary to complete the marketing package.

6.) Develop Marketing Package

Developing the marketing package for sellers requires input from all TVG team members. The document in finalized form is an excellent roadmap of operational, financial, tax and other information frequently asked by buyers and their support groups. TVG takes pride in having one of the best marketing packages in the industry for marketing the businesses that they sell.

7.) Seller Review & Approve Marketing Package

TVG will not market a business until the seller(s) have signed off on the accuracy of the marketing package and also the summary for the business listing website. Sellers are encouraged to thoroughly review both documents for any necessary corrections, clarifications, and additions.

8.) Begin Marketing Business

Once the marketing package is completed and reviewed by the sellers, the TVG team will begin looking for qualified purchasers. An email notification of the new listing is sent to the TVG buyer database of over 10,000 potential acquirers. A very confidential written 100 page executive summary of the business is published on various web sites informing interested buyers. Qualified buyers are not informed of the location or name of the company until first supplying a signed and dated financial summary and a confidentiality agreement.

9.) TVG Interviews and Filters Buyers

Interested buyers are entered into the TVG system in relation to the company they are inquiring about. Both TVG staff and business intermediaries will analyze the buyer profiles and speak with the buyer prospect to determine if they are appropriate to pursue in the opportunity. Interviews are then set up in person, where possible, or by teleconference, if necessary.

10.) Buyer / Seller Meetings

The initial meeting between buyer and seller allows the buyer to tour the seller’s facility and to ask the seller questions about the operation. The buyer should be prepared to open the meeting with comments about professional experience, acquisition goals, and why they feel, at least initially that the subject company is a possible target. The initial meeting is often followed by questions from the buyer that arose as a result of both his first meeting and continued analysis of the marketing information prepared about the selling firm.

11.) Buyer Submits LOI / Offer to Purchase

The most used technique to start the actual negotiations is the Letter of Intent to purchase (LOI). This document, although non-binding, is the roadmap by which negotiations follow. It will usually lead the parties through the due diligence process, the funding options of the buyer, and the final purchase contract which is generally drawn up just prior to closing.

12.) Negotiations Between Buyer / Seller

The TVG Business Intermediary is responsible for keeping the negotiating process moving forward, and maintaining an arms-length transaction between the parties.

13.) Solidify Price and Deal Structure

The basic deal points of price and deal structure usually lead the way in negotiations and will be the first items to get handled between the parties. Frequently, the LOI document will be changed several times before being signed by all involved.

14.) Apply / Obtain for Financing

Third party lenders have their own due diligence checklists which often stretch the closing process. Other financing vehicles such as conventional loans are usually quicker. Seller financing, where applicable is usually the quickest of all funding methods often only taking weeks to a closing.

15.) Finalize Purchase Agreement

Both parties should have their own legal and tax representatives contribute to review the final purchase agreement. As one would surmise, this process can take time to get all parties to reach agreement about the final “definitive agreement.”

16.) Business Closing

TVG Business Intermediaries are responsible for setting up the closing at a venue acceptable to all parties. Each party will receive a buyer and seller’s closing statement outlining the proceeds/expense of sale. The closing will also encompass the buyer finalizing the loan process with any third party lenders. Closing generally takes one to three hours and is the final step in the sales process.

TVG recognizes that in some instances, a business owner may have their own potential buyer prospect. Most of the time, these prospects do not move forward because the buyer and seller are unaware of the process and ultimately a deal never materializes. A qualified Business Broker proves invaluable in this process since both parties most likely will have never been through the process.

We have developed a process we term, Facilitation, that we feel mitigates this issue for sellers. In this scenario, TVG will perform the functions listed below for a reduced success fee. In the business transfer process, historically, finding a buyer is only 20% of the process. Actually walking a buyer and seller through the process and ultimately going to closing is the lion’s share of the work. While our fee will vary depending on the situation, our business intermediaries will be ready to discuss this with you.

Facilitation Functions

• Consultation with seller and review of seller’s documentation
• Development of marketing plan and marketing package (if applicable)
• Assistance in determining asking price and deal structure
• Coordinate and facilitate all buyer / seller meetings
• Additional consultations with buyer / seller
• Assisting buyer (if applicable) with preparation of offer to purchase or letter of intent and presentation to seller
• Act as a buffer between buyer / seller during negotiations
• Offer follow-up with buyer / seller
• Meetings with buyer / seller to coordinate buyer due diligence
• Consultations with buyer / seller and outside advisors
• Assist buyer in obtaining financing (if applicable)
• Coordination of closing and other documentation with attorneys
• Consultation with parties regarding transfer of licenses, utilities, etc.
• Assist with and coordinate the closing and subsequent transfer of the business

Fees

Though fees vary on the size of the transaction, on all transactions there is a preparation fee and a success fee at closing.

By whatever name, Business Intermediary, Business Broker, Mergers and Acquisitions Agent, Investment Banker or Transfer Agent, the right representation can make the difference between closing and losing a deal. Due to confidentiality, a Business Intermediary cannot simply place a sign in a window like a real estate broker and wait for a prospective buyer to call. Selling a business takes a lot of effort and time. Think of a business broker as dedicated project manager who has to prospect for buyers under a cloak of secrecy and ensure confidentiality throughout the entire business transfer process. A professional Business Intermediary can find financially capable prospects, negotiate the deal, and set up closing without anyone finding out until the deal is done. 

1. Pricing a business

If you have a buyer, what technique will you use to establish price? Even if a price has been agreed upon by the buyer and seller, how can you, as a seller be sure the price you have agreed to is the highest justifiable price or the price that enables you, as a seller, to receive the highest price the market will pay without leaving money on the table? A competent Business Intermediary should be able to arrive at this price after a close financial analysis of your company. Business Intermediaries will determine this figure in conjunction with your CPA and a thorough market analysis. Having a business on the market with too high a sale price will ultimately frighten prospective buyers, while under-pricing a business could cost you money. A Business Intermediary can assist you in determining the best price for taking a business to the market.

There are several skill sets that a professional Business Intermediary introduces to ensure that a seller obtains the highest price for a business. Evaluation experience, market awareness, and knowledge of deal structure are a few of these skills. A Business Intermediary sells businesses in the marketplace daily and is current with overall supply and demand. No other professional is in this position. It is important that to use everyone on a support team for their specific area of expertise. Refer to your attorney to draft legal documents, your CPA for his tax advice, and your broker to guide you through the business transfer process.

2. Buyer prospecting

Once a business owner has decided to sell his business and all the pertinent documents have been prepared, how will prospective buyers find out about the business and how can the seller be assured the buyers are capable? A majority of people in the United States has thought about owning their own business, but only a small percentage ever does. When a business becomes available for sale, the most strenuous step is pre-qualifying prospective buyers. On average, for every one (1) buyer introduced to a business owner as a prospective buyer, we have usually met with between 10-30 prospects. Many prospective buyers do not have the financial resources, are not a good fit, or are just “window shopping.” A Business Intermediary will act as a buffer and allow you to concentrate on running your business rather than wasting your valuable time parading unqualified buyers through your business.

3. Confidentiality

Preserving confidentiality is one of the main reasons to hire a Business Intermediary. A professional Business Intermediary will have variations of confidentiality agreements already drawn up and is familiar with how to effectively administer this important document. Most Business Intermediaries will not discuss a business with a perspective buyer unless a confidentiality agreement has been signed. To further ensure confidentiality, a financial statement from the buyer will often be required at the same time the confidentiality agreement is signed. The idea is that if a prospect signs both a confidentiality agreement and gives his financial statement, he will most likely adhere to confidentiality and not just test the proverbial waters. By taking these measures in the beginning, confidentiality is insured by eliminating the “tire-kickers” before a company name or location is given.

4. Negotiating a better deal

A business owner is emotionally tied to his business, negotiating on emotion rather than reason. A Business Intermediary can negotiate the best deal for the owner because he is not intimately connected with to the business, but operates in the owner’s best interest. A business broker has dealt with many business transfers and is aware of all the nuances involved. He foresees problems and deals with them, while a business owner going through the process for the first time could lose a deal because of lack of experience.

5. Professional marketing program

As an experienced business owner, you definitely know how to run a successful entity and make it grow. When you are ready to sell, the “nuts and bolts” of your business have to be presented in the most succinct and positive manner in order to entice prospective buyers to consider your business as an acquisition candidate. A Business Intermediary is skilled at preparing concise, informative marketing packages on businesses he represents. After a package has been prepared, the word still needs to get out. Without a proper marketing campaign an otherwise stellar business may go unnoticed. Business Intermediaries have the resources available at their fingertips to advertise a business with the highest confidentiality and maximum exposure.

Most Business Intermediaries will search their internal database for pre-qualified buyers to find a match for your business. If no match is found, Business Intermediary will use marketing mediums such as newspaper, internet, trade publications, and other business brokerage firms until the right buyer is discovered. Even though a Business Intermediary utilizes an enormous amount of time, effort and money to market a business, it is a fraction of what an owner would expend. A Business Intermediary knows the quickest, most effective methods of reaching the buying masses, while preserving confidentiality.

6. The closing process

The closing process is usually the most strenuous and nervous step for all parties involved. An experienced Business Intermediary will have experience working with closing attorneys or the escrow companies. He will be able to handle the problems that arise with attorneys or the escrow company. The Business Intermediary along with the closer will ensure that your interest is protected and ensure the deal closes.

7. Handling the support team

We have previously mentioned that you will have a support team in place to facilitate a smooth transfer. Your CPA, attorney, broker, lender, comptroller, and others will be needed in the process. It is imperative to have a point person to coordinate the team. That person should be your Business Intermediary. Using a Business Intermediary to sell your business will alleviate the time constraints involved in coordinating your support team. Most importantly, no one on your team will have the experience that a Business Intermediary has throughout the process. Members of the team might specialize in certain areas, however the business broker is the only one whose job is to facilitate and coordinate the entire process.

8. Time Consuming

Selling a business can take hundreds of hours of dedicated time which will keep you from doing what you do best; running your business. If you go through the process alone, the amount of time the process would take you away from your business could have tangible negative effects.

9. Summary of Business Intermediary services

Following is a list of services that a qualified Business Intermediary provides during the business transfer process:

• Consultation with seller and review of seller’s documentation
• Review of seller’s financial statements
• Performing a market analysis
• Preparation of a listing agreement, seller’s disclosure and seller file
• Development of marketing plan and marketing package
• Preparation & submission of advertising
• Initial buyer response, interview, and screening
• Business showings and buyer follow-up
• Additional consultations with buyer/seller
• Assisting buyer with preparation of Offer to Purchase or Letter of Intent and presentation to seller
• Offer follow-up with buyer/seller
• Meetings with buyer/seller to coordinate buyer due diligence
• Consultations with buyer/seller and outside advisors
• Coordination of closing and other documentations
• Consultation with parties regarding transfer of licenses, utilities, etc.
• Attending the closing and subsequent transfer of the business

You should sell your business when you are ready and when the time is right. A competent business owner should always have an exit strategy. The following list of items will not only add value to a business but will also increase its marketability. If you are not ready, contact us for help with your exit strategy.

1. Increase sales annually

When time comes to sell, annual sales to a business are equivalent to location in real estate. Sales is one of the main variables that buyers review when they are evaluating a business. They are hesitant to purchase a business with sales on he decline. If they do, the value they are willing to pay is usually at a significant discount. Buyers are leery anyhow since they feel that sellers must be hiding something; therefore, decreasing sales are very difficult to validate as a reason for selling.

2. Remove yourself from the business

If you are the business owner that reminds people of “Norm” from the sitcom “Cheers”, where everybody knows your name that may be great for business, but could be harmful for a business transfer. In order to maximize the market value of a business, owners have to disassociate themselves from the business and have customers, employees and suppliers sign on because of the company not the owner. This point cannot be clearer than when your name is Joe Doe and you own Joe Doe Supply Company.

The best method of removing yourself from a business is to train your right-hand person to take on some of your responsibilities. You can take it a step further and train someone to fill his shoes in case you lose a main employee. The greater the infrastructure, the more valuable a business will become.

3. Develop a strong management team

In addition to removing yourself as the point person, developing strong management is equally important. The expression, “People are the most important asset in a business” could not be more true when a business owner is selling. A buyer can analyze financials and examine equipment and inventory to determine tangible economic value. This analysis is clear-cut. One of the major factors that will move this value up or down is the quality of the employees. How long have they been there? What industry experience do they have? Is there backup to the owner and the important managers? Will there be key employees to assist the new owner with the business?

Selling a business for only tangible assets and financial figures will net minimal value. The extra amount that can be received is in the infrastructure, that is, the employees. Investing in employees will pay off during the time a seller owns a business and ultimately during the business transfer.

4. Replace family members that work in the business

Having family member work in the business is one way to build a business. Unfortunately, it could be a huge detriment when the time comes to sell. A prospective buyer will be very concerned if a seller’s wife, son, brother, etc. work in the business due to the uncertainty of employee retention. Even if the family members agree to stay on after the business transfer, the buyer might still have concerns. It is common for family members to be paid more than a regular employee in the same function, which could cause concern for a buyer. In addition, there might be the perception that the family member is not the most qualified within the company, but rather that nepotism took over. This would lead a buyer to surmise that he is not getting the most qualified person for the job.

5. Reduce the amount of owner perks

Most small businesses owners “live” out of their business. In the small business arena, if you have hired a good accountant, the net income on the year-end tax return is usually between $0 and $100,000. This does not mean the cash flow to the owner is low, since the difference is usually in salary and owner perks. These owner perks can include: health insurance, auto insurance, meals, entertainment, travel and personal purchases. Even though these perks are valid, often first time buyers have a difficult time understanding all of them and at times dismiss them in their cash flow analysis.

EBITDA plus owner salary is the most common form of cash flow to a buyer. In a small business, owner perks can often be a large percentage of the total cash flow. Since lending institutions and buyers focus on EBITDA, it would be wise to reduce or eliminate owner perks for one or two years prior to selling a business. In addition to reducing perks, it is mandatory that the perks you continue to expense be paid through specific and verifiable expense line items.

6. Sell unnecessary assets

Most business owners have accumulated obsolete, duplicate, or unnecessary assets over time. When marketing a business for sale, it is difficult to obtain a price based on the amount of assets if they are not necessary for the operation of a business. By selling the assets in advance, the business owner gains added revenue from the sale of assets and a better business package to sell off what is left. The sum of the parts should always be more than the whole, when it comes to selling unnecessary assets and then the business.

7. Reduce inventory to a manageable level

Similar to unnecessary assets, inventory should be kept to a minimum to maximize a business transfer. A buyer will not pay for dead or obsolete inventory. Before closing, most buyers will take a physical inventory count to ensure the inventory for which he is paying is accounted for and in good condition. In addition to dead and obsolete inventory, excess inventory can hinder a business sale. Normally, a buyer will only want the inventory that is necessary to run the business. If inventory levels are too high, the buyer might not be able to substantiate or afford the sale price with the excess inventory included.

8. Develop a strong sales force

A salesperson is very easy to find, but an effective salesperson is very difficult to find. Most businesses that sell a product or service can improve their sales with additional salespeople. When selling, a prospective buyer will pay special attention to the method used to increase sales. If the owner is the only salesperson, red flags are bound to come up. Conversely, if a solid sales team is in place, the buyer will feel more secure.

9. Diversify the customer base

The old adage, “Don’t put all your eggs in one basket”, applies to a business owner’s customer base. Though having few customers might make it easier for an owner to run his business, a buyer would not want to inherit the risk of the business’s customer base concentrated in one or two large customers. Diversifying the customer base will not only increase the chances of selling a business, but also will stabilize sales and reduce the effect of losing a customer. To be most effective it would be wise to never have any single customer account for over 20% of sales.

10. Develop an organizational chart

Since employees are of key importance, an organizational chart acts as an excellent tool to summarize the team. The chart should include: tenure, pay, position, and job description. Having a snapshot of the workforce will make it easier for a prospective buyer to evaluate the employee infrastructure.

11. Reduce unnecessary large purchases

If large purchases are needed but not essential, let the buyer decide if he wants to make the investment. It will be easier to offer a business at a price that does not include a recent large purchase. As long as the rationale is explained, a buyer will be grateful and will be in position to make a more informed decision.

12. Additional steps used to prepare for a later sale

• Eliminate unproductive employees
• Develop and/or improve company website
• Have written procedures for operations (i.e. employee manuals)
• Keep you’re A/R higher than A/P
• Keep A/R within 30-60 days

The sale of a business does not have to be marked with pitfalls. Below are the most common mistakes that seem to be repeated by business owners who do not have the proper guidance.

1. Avoided simple “rules of thumb” to value a business.

Become familiar with accepted valuation techniques. Most industries seem to have perceived techniques for valuing businesses. Many of these rules of thumb, however, are not accepted by the valuation / lending industry. Owners should avoid listening to uninformed sources for determining value, just because those sources are in the seller’s industry. Owners that have sold a similar business will not be informed sources, in that they tend to not understand all of the intakes that went into making their own sale. Former sellers also usually tend to leave out important aspect of what was included in their sale, such as the inclusion of A/R, real estate, and the handling of debt.

2. Listening to other seller sale prices

In the real estate industry, it is easy to look up comparables on properties. Business sale prices have so many variables that comparables are only one of many components. When a business owner discovers that one of his peers sold a business and also discovers the sale price, the owner immediately equates that price to his business. The big problem with that logic is the sellers always exaggerated the price of their business and no one ever knows exactly what was included in the sale price (inventory, cash, A/R, etc.).

3. Overpricing businesses

The ultimate price for a business is the highest justifiable price a buyer will pay for it. The buyer ultimately determines that price, although you need an amount to start with. Many business brokers will list a business for sale at whatever price the seller asks, even if the Business Intermediary knows the price is too high. The reason for this is that some Business Intermediaries want as many listings as possible. An overpriced business will sit on the market and become tarnished over time due to overpricing. By overpricing a business, a seller could lose a good prospect, because the prospect thinks that there is not enough leeway to come down in price. If you treat the sale of your business like the sale of a used car, you are in for a long and arduous business sale process. If a Business Intermediary is allowed to price a business at the fair market value, the process will be smoother and a seller will ultimately receive the highest justifiable price for his business.

4. Bad books and records

Many times a business owner “lives” out of his business, and his books and records are not kept as well as they should. A solid, well-run business that has incomplete or inaccurate records will negatively affect he sale price and even prevent a sale. If a buyer needs to obtain outside financing for a business and the records are not consistent, this could cause a bank to reject a loan. Even worse a buyer might not feel comfortable enough with the records and never make it to the point of placing an offer.

Having good, clean records is absolutely essential in business transfer. If a proper paper trail for revenue and expenses cannot be documented and supported it is unlikely that the seller will receive his asking price. In fact, one of the biggest reasons deals fail after the contract of sale is signed is due to bad records.

5. Unable to prove owner perks

Key to effective deal making is the ability of an owner to prove cash flow from company financials. Owner perks, for example, can make up a large portion of a firm’s cash flow. If receipts and general ledgers and the connection to the corresponding line item on the P&L statement cannot be traced, the perk should not be included in the cash flow.

Much can be said about the subject of owner perks in analyzing a firm’s cash flow such as the problem of legality. The IRS has specific guidelines in what to legally allow in tax computation. Business owners usually walk a fine line in the area of perks. The problem that arises is that in the process of “hiding” the perks, a paper trail is either lost or impossible to reconstruct. There are many profitable businesses that should have sold at much higher prices, but due to poor records or paper trails, the real cash flow could not be proven. The company’s CPA is often not in a position to assist in the reconstruction of a perk, since most owners do not disclose perks with them.

6. Year-end adjustments

This area of bookkeeping is usually performed at the end of the year when the CPA calls to give the owner the bad news about his income tax exposure. Many owners start playing with costs to reduce their tax liability. Unfortunately, these owners are not concerned about the effect of their adjustments on the company performance related to cash flow, since they are only concerned about the effect of their adjustments on the company performance related to cash flow, since they are only concerned about lowering taxes. One of the main areas owners scrutinize is the ending inventory figure. They know that a lower ending inventory results in a higher cost of goods, therefore a lower net profit resulting in a lower income tax.

Another target area for many owners is the Cost of Goods section of the company’s P&L. We have seen everything including owners compensation end up in the cost of goods sold. The problem is, the resulting picture given to buyers is a very inconsistent gross profit situation when analyzing several years of operation. Many times the owners themselves do not remember what they did and cannot explain it to buyers. This often creates a nightmare for buyers going through due diligence trying to understand the flow of the business. The business may be fine but a year-end adjustment can skew figures such as cost of goods and gross profit, creating a hazy picture to explain.

7. Inexperienced Business Transfer Attorneys

The legal profession is just as specialized in some ways as the medical field. The implications of legal specialization are enormous in the area of business transfer. There are many occasions when a business owner’s personal attorney is not equipped to provide specialized advice concerning a business transfer.

8. Inexperienced business transfer CPAs

As previously mentioned, we find that most business owners get too involved in the sale price and do not pay as much attention to the legal and tax implications of the sale. Similar to the legal field, there are CPA’s that specialize in business transfer. As soon as we list a company for sale, one of the firs things we recommend to an owner is to obtain specialized legal and tax representation. It is interesting that business owners who are normally hard-nosed and have to make hiring and firing decisions as a way of survival have a difficult time making the decision to get specialized tax advice. We hear phrases such as “I have the best accountant in the world who has been with me since the beginning and helped me through some tough times.”

The idea here is not to turn your back on trusted representation. We see nothing wrong with getting specialized help and letting your trusted representatives oversee the entire process. Isn’t this what happens in the medical field when you have major surgery? There is the family physician that many times is the referring doctor to a diagnostic family physician that many times is the referring doctor to a diagnostic specialist and then a surgeon (another specialist) performs the actual surgery. Getting specialized help in selling may be the difference between driving a Lincoln instead of a chevy during retirement. We hope you get the idea.

The tax angle has to be handled by a specialized CPA, but some CPA’s also think they are valuation specialists and know more about pricing than a qualified Business Intermediary or valuation company. As far as establishing price, in our opinion, the only people that are really in position to know are either business brokers that are actively involved in day to day aspects of selling businesses or third party valuation firms with good reputations.

9. Bad attitude from seller

Next to bad records is a seller with a bad attitude in terms of hindering a deal. We see very profitable businesses with excellent records, strong cash flow and an excellent history that should have sold, buy did not, due to an owner’s bad attitude. The selling process is arduous for everyone involved especially the seller. The ” I do not have to sell” or “Take it or leave it attitude” does not have a place in business transfer. An owner with an open attitude that treats buyers as guests is more likely to sell. The old saying about catching more flies with honey definitely applies here. An owner with a good attitude who realizes the burden of proof is on him, rather than the other way around, is much more likely to sell his business at a justifiable price.

A good attitude is also important for the support team to portray. If a seller is happy with a proposed deal, then by all means let he CPA, Business Intermediary and attorney know. The support team should be well advised by the seller to stay on their respective sides of the fence in a transaction. They need to portray the same positive attitude the seller has to show a unified front.

10. Uninformed spouse

In certain states, a spouse is required to sign a listing agreement and closing documents; therefore, needs to be well informed of all aspects of the selling process. Problems with a spouse in a sale usually arise due to poor communication. Your spouse should be present in the first meetings with a Business Intermediary concerning valuation and marketing, since the broker will explain all of the steps of the selling process in the first meetings. The spouse should also be present at buyer meetings, to ensure they are comfortable with the process and the buyer.

11. Not handling your support team

Sellers should be aware that it takes an experienced support team to successfully handle and complete a business transfer. Attorneys, CPAs, Business Intermediaries, lenders and others will need to work together to get a deal done. There is no room for “power plays” or egos in this group. To avoid a major pitfall, a seller should be able to recognize everyone’s area of expertise and make sure he stays within his specialty.

The key term is team. We have seen deals when the Business Intermediary, CPA and/or attorney work in separate vacuums and do not communicate with each other, with each party working in a different direction. If a seller has run a business for a number of years, he knows how difficult it has been to ensure employees work together. Do not assume it could not be the same with your support team. The selling process is the time to use you management skills to ensure a seamless process.

12. Messy business

As discussed in the chapter on “showing a Business”, it is imperative to have an orderly and professional environment to show potential buyers. It is hard to change a buyer’s first impression, so make it a good one.

13. Continuing the course of business

A business is no sold until you are a closing and the final documents are drafted. Many business owners get so wrapped up in the transfer process that they do not pay the attention needed to run their business. The transfer process is long and arduous. Therefore, a deal could be in due diligence for months. If sales slip during that period, a buyer could opt out of his contract. Once business owners know they are getting ready to sell, they focus too much on where they will be spending their vacation or retirement and not enough time maintaining their business. Decreasing sales will negate the efforts of years of business, subsequently reducing the sale price. Sellers who allow their sales trends to drop and profitability to dip, if detected by a lender, are at risk of losing financing.

14. In adequately planning your exit strategy

Choose the right time to sell, have clean records, adequate bookkeeping of owner perks. The old adage “timing is everything” is right on the money in business transfer. The right time for selling might be right for the owner for personal reasons such as retirement, but the wrong time for the business. For example, if sales and profits have been declining, buyers and lenders will perceive that the business is in trouble, and that is the reason the owner wants to sell. If the company has had a bad year in one of the last three calendar years, lenders may back off from buyers attempting to get a loan for the transaction.

In many instances, small privately held companies have adequate records for the IRS, but not enough detail or paper trail for adequately documenting owner perks. The owner should have adequate paper trail and explanation of all areas of owner compensation from the general ledger, to financials to the firm’s tax returns. This accountability should be prepared for the past three corporate years before a sale. Click here to find out more about Exit Planning.

15. Have a thorough knowledge of the tax consequences of selling before you start the process

Owners should seek council with their CPA before they start the selling process, to get an understanding on the potential tax implications of a sale. In many instances, the company’s CPA should also be consulted after the broker has been selected, and the type of sale has been recommended. Having a basic understanding of their tax ramifications before the process starts, can keep a sale from bogging down later in the deal.

16. Not adopting a “dealmakers mentality” in selling

Avoid drawing lines in the sand early in the sale. Many business owners have a predetermined idea of the value of their business before they ever consult a broker, and have already determined that they will not sell at below that figure. As in any form of selling, selling a business is a process of give and take, and drawing a line in the sand, will usually set a barrier to going forward. Business owners considering selling should therefore try to keep an open mind in all aspects of the sale.

17. Not keeping an open mind in the length of time required to assist the buyer in transition

Plan on the possibility of signing a consulting agreement that will be fair to and will assist the new owner. In most companies, the owner has acquired specific skills that cannot be passed on to a buyer in one or two months. It is a standard in the brokerage industry, that sellers stay on after the sale for one month at no charge. This is not always adequate, but the seller wants to move on with his life. A consulting agreement, with adequate compensation allows the new owner to consult with the seller when a specific need arises, and still allows the seller to have control over their schedules. Having an open mind to this possibility can go a long way to reducing buyers concerns over learning the business.

 

 

The sooner the better. The ideal time to develop an Exit Strategy for your business is when you start or purchase a business. However, industry statistics indicate that 85% of all business owners do not have a defined exit strategy although, on average 75% of their net worth is tied up in their business.

The company’s financial records and operations must be evaluated and analyzed to determine the strengths and weaknesses of the company. Proper planning will help you address and hopefully minimize any operational or financial weaknesses of the company before launching the marketing phase of the disposition process.

The market price range of your company is estimated after consulting with all of your team members (accountant, valuation expert, M&A specialist) and evaluating all of your goals and objectives. Timing considerations, proposed transaction structure, industry conditions and lending market conditions are all key elements to consider in estimating the market price range for your company.

Confidentiality in dealing with internal personnel and external sources is highly encouraged and is critical to achieve a successful transaction. For the Seller’s protection, The Vant Group requires a Buyer’s Confidentiality Agreement to be signed by the potential buyer before the release of the Business Memorandum.

Very possibly. The Vant Group’s extensive buyer database includes over 2000 high net worth individuals, corporations, and private equity groups. The Vant Group will also perform a customized marketing plan to target qualified buyers for your company.

One of The Vant Group’s principals will serve as your primary contact and will “guide” you through the entire business transfer process. Personalized 24/7 service is the trademark of The Vant Group.

The fees and expenses of The Vant Group are specific to the services required for the engagement and the size of the business. We are available, at your convenience, to speak with you by phone or we offer a complimentary in-person consultation to determine the level of service required to accomplish your goals and objectives.

It has been our experience, that to serve our clients effectively, a team approach is best. We recommend that we are your exclusive Merger & Acquisition advisor. We will work in concert with your attorney, CPA, and other key advisors.

The Vant Group typically represents business owners in the South Central United States; however, we market and sell to regional, national, and international buyers.

Business Brokers are the professionals who will facilitate the successful sale of your business. As your Business Broker, we can help you decide how to price your business and how to structure the sale so it makes sense for everyone – you and the buyer. We can find the right buyer for your business, work with you and the buyer in negotiating, and every step of the way until the transaction is successfully closed. We will also help the buyer with all the details of the business buying process.

A Business Intermediary is not, however, a magician who can sell an overpriced business. Most businesses are saleable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept along with the terms of the seller financing can greatly influence not only the ultimate selling price, but the success of the sale itself.

It generally takes, on average, between six to nine months to sell most businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner we have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business. This theory often “backfires,” because buyers often will refuse to look at an overpriced business.

Surveys have shown that a seller who asks for all cash, receives on average only 70 percent of their asking price, while sellers who accept terms receive on average 86 percent of their asking price. That’s a difference of 16 percent! In many cases, businesses that are listed for all cash just don’t sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the amount received. And again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.

When a buyer is sufficiently interested in your business, we will help in the preparation of an offer or proposal. This offer or proposal may have one or more contingencies. Usually, they concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one) or other pertinent details of the business. The buyer’s proposal will be presented to you for your consideration. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer’s proposal, the buyer can withdraw it at any time.

We will submit all offers to you for your consideration. At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, “The first offer is generally the best one the seller will receive.” This does not mean that you should accept the first, or any offer – just that all offers should be looked at carefully.

When you and the buyer are in agreement, we will work with both of you to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process. You don’t want the buyer to think that you are hiding anything. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, final papers will be drawn and signed. Once the closing has been completed, money will be distributed and the new owner will take possession of the business. As you Business Intermediary professional, we will work with you throughout the entire sales process.

You can cooperate fully with us and any other professionals that you are using. A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. You might also ask if their schedule will allow them to participate in the closing on very short notice. If you and the buyer want to close the sale quickly, usually within a few weeks, unless there is an alcohol or other license involved that might delay things, you don’t want to wait until the attorney can make the time to prepare the documents or attend the closing. Time is of the essence in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal.

And, finally, your team of advisors must all be working towards the common goal of selling your business for the best price and terms available in the marketplace, and closing the sale as quickly as possible! Remember that, as your professional Business Intermediary we are on your side. Only by being as cooperative as possible with us can we best handle you business interests.