Seller Resources

Considering the sale of your business?

You will find a wealth of information here to organize your process.

There are many reasons for business owners to sell. Any of the following scenarios can trigger that decision.

 

  • Owner reluctant to invest to take business to next level
  • Technology changes and customer base changes
  • Recapitalization needed to grow the business
  • No family or partner to turn company over to
  • Business relocation due to expiring leases
  • Lender’s refusal to provide credit lines
  • Owner or family health problems
  • Difficulty with supplier
  • Estate planning need
  • Owner burn-out
  • Staffing difficulties
  • Retirement

We add value to the sale for the seller who may walk away from the sale with more money and under better conditions than might be possible with the seller selling his/her business directly.

 

Here is how we can help you through this process:

  • By channeling through us, you, the seller, will remain anonymous to the buyer until he has substantiated that he is financially capable of purchasing the business. This confidentiality is important so that you maintain your accounts, keep your employees, and maintain your clients. A seller may not even want family members working in the company to know he is selling the business as it can ignite emotional upheaval in the workplace.
  • We provide outsourcing or independent appraisals for business evaluation. This information will provide you with a third party opinion of the value of your company. Our job is to gather all the information and organize it for the business valuator. With a business valuation, the broker will go to the market with substantiated information for the buyer’s offer. This information is especially important if you wish to have the SBA finance the business.
  • We will recast the owner benefits after receiving the appraisal. This may be a difficult process for owners who have run their business for years….they are good at that; they have had vision and stamina; we are good at selling the company. Many owners may be unaware of their acceptable and non-acceptable deductions and also be unaware as to how to price the business; they may put an emotional value on the company which may put the business out of the marketplace entirely. Our job is to find an acceptable market price. You will also need to consult with your own CPA to get an estimate of what the tax consequences will be with the selling of your business.
  • We acquire comprehensive knowledge of the business. As the seller, you may know what doesn’t work in the company but because of your deep involvement may not know its strengths and how to market those strengths.  We assist you in maximizing your company’s potential and minimizing your company’s risks.
  • Negotiating the deal is a stressful time. Sellers are caught up in the moment with not getting it all and believe that the buyers are caught up in wanting it “all for nothing.” As the intermediary or business broker handling the transaction, it is important to keep emotions out and reason in. “It’s not the price of the deal but the terms” is well-known axiom in our industry, but we also say that both the price and the terms must remain paramount and relative to each other. Consulting fees, capital gains tax, and seller notes are some significant factors which can affect the sale and purchase of your business.
  • We work at keeping the team process going smoothly. There are many distractions that are occurring during the marketing and selling of your company. You are still running the day to day business and the buyer is after every bit of information he can get to substantiate the price or reduce it. Being organized and having credible information available is important; having a competent, deal making business attorney and a knowledgeable accountant available is critical.
  • Below are some of the items you will need:
    • Inventory included in sale of business (If possible, original cost and age; if leased, copy of agreement/terms)
    • Equipment included in sale of business (If possible, original cost and age) (If leased, copy of agreement/terms)
    • Profit & Loss Statement (Balance Sheets & Income Statements) and Tax Returns for last three years and current year to date
    • Personal Item List within the business not included in the sale
    • Real property Tax Bill/Appraisal if available (If the property is to be included along with copies of notes and mortgages) or a Copy of property Lease
    • Key Employees with payroll breakdown, time employed, and evaluations of each (Name/Salary/Rating of excellent, good, fair, poor)
    • Owner’s expectations for the Business/ History of Business, short narrative, with brochures and pamphlets
    • Meeting/telephone (approximately two hours) of initial introduction and information
    • Business Valuation (independent third party valuation)
    • Processing Fee (refundable/credited back to you at closing)
    • Due Diligence

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Considering the sale of your business?

There are many reasons for business owners to sell. Any of the following scenarios can trigger that decision.

 

  • Owner reluctant to invest to take business to next level
  • Technology changes and customer base changes
  • Recapitalization needed to grow the business
  • No family or partner to turn company over to
  • Business relocation due to expiring leases
  • Lender’s refusal to provide credit lines
  • Owner or family health problems
  • Difficulty with supplier
  • Estate planning need
  • Owner burn-out
  • Staffing difficulties
  • Retirement

Here is how we can help you through this process:

  • By channeling through us, you, the seller, will remain anonymous to the buyer until he has substantiated that he is financially capable of purchasing the business. This confidentiality is important so that you maintain your accounts, keep your employees, and maintain your clients. A seller may not even want family members working in the company to know he is selling the business as it can ignite emotional upheaval in the workplace.
  • We provide outsourcing or independent appraisals for business evaluation. This information will provide you with a third party opinion of the value of your company. Our job is to gather all the information and organize it for the business valuator. With a business valuation, the broker will go to the market with substantiated information for the buyer’s offer. This information is especially important if you wish to have the SBA finance the business.
  • We will recast the owner benefits after receiving the appraisal. This may be a difficult process for owners who have run their business for years….they are good at that; they have had vision and stamina; we are good at selling the company. Many owners may be unaware of their acceptable and non-acceptable deductions and also be unaware as to how to price the business; they may put an emotional value on the company which may put the business out of the marketplace entirely. Our job is to find an acceptable market price. You will also need to consult with your own CPA to get an estimate of what the tax consequences will be with the selling of your business.
  • We acquire comprehensive knowledge of the business. As the seller, you may know what doesn’t work in the company but because of your deep involvement may not know its strengths and how to market those strengths.  We assist you in maximizing your company’s potential and minimizing your company’s risks.
  • Negotiating the deal is a stressful time. Sellers are caught up in the moment with not getting it all and believe that the buyers are caught up in wanting it “all for nothing.” As the intermediary or business broker handling the transaction, it is important to keep emotions out and reason in. “It’s not the price of the deal but the terms” is well-known axiom in our industry, but we also say that both the price and the terms must remain paramount and relative to each other. Consulting fees, capital gains tax, and seller notes are some significant factors which can affect the sale and purchase of your business.
  • We work at keeping the team process going smoothly. There are many distractions that are occurring during the marketing and selling of your company. You are still running the day to day business and the buyer is after every bit of information he can get to substantiate the price or reduce it. Being organized and having credible information available is important; having a competent, deal making business attorney and a knowledgeable accountant available is critical.

STEPS TO ASSURE A SUCCESSFUL SALE

  • Clean up the company Balance Sheet by removing assets that are old, unusable or cannot be sold
  • Do tax planning before marketing the company. It may require restructuring.
  • Have audited financial statements to add credibility and value. Keep all receipts.
  • Manage the income statement to alleviate inconsistent growth and earnings.
  • Raise the company’s public profile to add visibility and perceived value.
  • Document the competition comparing similarities, differences, strengths, vulnerabilities.
  • Examine your company as a buyer would. Conduct your own due diligence in areas of operations, marketing, personnel, technology, legal, regulatory, environmental, insurance, contractual, credit and accounting.
  • Understand the buyer’s needs regarding return on investment, debt service, and other core requirements.

We offer a variety of structured fee based plans to work with seller’s needs. This fee is usually built into the selling price and paid by the seller, but sometimes paid by the buyer. The purchase price may include the commissions that paid to the broker for the effort and expertise. Our goal is to create a successful transaction for you.

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HOW TO VALUE A BUSINESS

Deciding to sell your business or grow your business by acquiring another company?

As everybusiness is unique, determining the value of a business is one of the most critical aspects of any transaction.  The terms of the deal is another determining aspect… the more you know, the better prepared you are to consummate a deal!

Assets, liabilities, historical earnings, cash flow, projected earnings, future cash flow, current market conditions, industry popularity, and, most important, the objectives of the seller or buyer as well as the value of intangibles (patents, know-how, the quality of management, leases) are all taken into consideration to determine a company’s fair market value.

The final selling price can be either higher or lower than the estimated range of values for the company, depending on the eagerness of the buyer to buy and the seller to sell, the demand for the type of company, the form of consideration paid, the negotiating skills of the parties, and most importantly, the terms of the deal.

In order for a buyer to formulate a fair market opinion of value, the seller will need to supply the following:

  • Three years of tax returns, and financial statements.
  • Copies of all contracts and leases and property tax bills
  • History of the business
  • List of key persons with job descriptions and salaries
  • Seller Criteria and Information Sheet
  • List of Equipment

Valuing A Business

  Below is one method of valuation which can be used in purchasing a business and determining its market value.  Not included but to be considered is “Good Will” the value attached to the business’s Name and Reputation.  This is what creates the revenues of the business. There are many other factors that must be considered when placing a price on a business.
The key to having a credible and viable valuation performed on the business is to have it performed by an independent third-party. Without this service the seller should be prepared for heavy negotiations due to the conflicting opinions of the seller’s opinion of value versus the buyer’s valuation.

Buying a business is an intensive and emotional process even though it is considered “numbers.” Also to be considered is the owner’s personality if you are going to have him hold a note (or the buyer’s personality if the seller is going to hold a note…and a note is almost inevitable uneven with SBA financing). Also important is the transition of the business…are the employees going to stay, is the business going to be re-located, the value of any inventory at seller’s cost, …so many other factors are important other than the price.

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FINANCING OPTIONS

 

It is important that a buyer or seller know the value of a business. If the SBA, a conventional bank, or seller is financing, both buyer & seller should have a clear idea as to the function of cash flow.

Below is a preview.  It is advised for both buyer & seller have an accountant to verify information.

1.
Gross Revenues
5.
Cash Flow/Net Profit Pre-Tax
-Cost of Sales -Interest Payments
Gross Profit -Depreciation
-Operating Expenses Taxable Income
-Debt Service x Tax Bracket
Cash Flow/Net Profit Pre-Tax Taxable Loss/Income
2.
Owner Salary
6.
Cash Flow pre-Tax
+Interest Expenses – Taxable Loss
+Depreciation After-Tax Cash Flow
+Fringe Benefits  (car, trips, credit cards, not related to the business)
Total Owner Benefit
3.
Triple Net Lease Payment (Annual Outflows)
+Annual Lease Expenses
Annual Lease Expense, Pre-Tax
4.
Annual Lease Expense, Pre-Tax
x (1-Tax Bracket)
Lease Expense per Year After-Tax

 

EBITDA: Represents income before Income Taxes, Interest Expense, Interest and other income and depreciation and amortization. EBITDA is presented as additional financial data but may not be representative of operating results or cash flows for the periods presented.

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SELLER FORMS

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SELLER PROFILE

SEQUENCE OF EVENTS FOR TRANSACTION

 

DUE DILIGENCE LIST

Below is a partial list of items your attorney and accountant will need in order to complete the transaction. As a seller, it is in your best interest to start collecting these items as soon as possible  to make the transaction smoother. Having these items ready for a buyer will show that you have a well-organized business that the buyer can have faith in. As a buyer, this list will help you organize what you will need to request from the seller.

#

Date Requested

Date Received

Due Diligence Items

1 Articles of Incorporation (By Laws, Minutes, Share Certificate, Stock Ledger)
2 Copy of any Shareholders Agreements
3 Copy of all effective loan agreements or current credit agreements
4 Copy of list for all bank accounts and reflecting current statements
5 Copy of federal and state tax returns for the last three years
6 Copy of list for all registered trademarks or trade names and copy of such filings
7 Copy of software licenses that are property of corporation
8 Copy of all commercial contracts
9 List and description of any claims or law suits
10 Intangible Tax 2004
11 Tangible Tax 2004
12 Fixed Assets Schedule
13 Depreciation Schedule
14 Amortization Schedule
15 Loans (identify and describe each person or company)
16 Monthly Sales Tax Records for 2002, 2004, and for monthly year to date
17 Copy of all Licenses
18 Sales tax
19 Copies of insurance policies
20 Balance Sheet & Income Statement Income (Profit & Loss) for the last three years
21 Bank Statements , and monthly year to date
22 Payrolls (Form UCT-6)
23 Aging of accounts receivable  (A/P aging summary)
24 Health Insurance (copies)
25 List of employees, employment records/contracts, job evaluation, description, salary, organizational chart
26 List of assets not included in purchase price
27 Copy of Property tax bill or schedule (if applicable) or building/property lease
28 Schedule of expenses paid for the benefit of shareholder/owner
29 Certificate of Good Standing
30 Copies of contracts with customers and suppliers
31 Copies of lease agreements
32 Pension Plan information
33 Brief history of the Company and its operations including a description of products (or services) offered and markets served
34 List of top customers and sales volume
35 Contact name, address and telephone number of the Company’s professional advisors.
36 Inventory List (if any)
ADDITIONAL ITEMS for the final transaction: 1.   Bill of Sale 2.   Non-Lien Affidavit 3.   Seller’s/Buyer’s Affidavit 4.   Seller’s/Buyer’s Corporate Resolution 5.   Cooperation Agreement 6.   Affidavit of (Transfer of fictitious name, web site, yellow pages advertising, telephone) 7.   Tax Reprobation agreement 8.   Assignment of trade name 9.   Assignment of Customer Contracts and Accounts 10. Assignment of Purchase and Sale /Definitive Agreement Contract (If to a corporation) 11. Non-compete Covenant 12. Promissory Note 13. Security Agreement 14. UCC-1 Financing Statement 15. Assignment of Lease 16. Collateral Assignment of Lease 17. Employment/Consulting Agreement 18. Purchase Price Allocation 19. Inventory list/Adjustment Worksheet 20. List of Vendors/Deposits 21. Closing Statement

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