When it comes time to sell your business, you will need the help of a business broker (agent). They know the market and can help you get your business sold quickly. In this blog post, we will discuss the process of working with a business broker to sell your business.
An important note, these are general guidelines. Each business transaction is unique and has its own requirements. Therefore, some of these steps will vary in every transaction.
Stage 1: Introduction, Expectations, and Agreement
Discovery call - This is the first meaningful contact with your agent. The plan for the call is to learn about your business, reasons for selling, and a high-level overview of business financials. In addition, the agent will provide insight into their experience and a basic description of their go-to-market strategy.
Collection of additional information - After the discovery call, the agent will provide you with a list of information needed to measure the value of your business.
Present Broker Opinion of Value - Based on the information provided by the business owner, the agent will outline what they believe is the value of your business. This is typically done at no cost to the seller. During the presentation, the agent will continue to educate the seller about the sales process.
Stage 1 Outcome: Determine if there is a fit. Sign a Listing Agreement.
Stage 2: Listing Price and Confidential Business Profile
Marketing strategy - Once the listing agreement is executed, your agent will create a formal marketing strategy. This includes websites where your business will be listed, outreach to their buyer database, and cold outreach to competitors (if appropriate) and related businesses.
Listing Price - Your agent will use the financial information that you provided, and match it up with industry information and their experience to make a listing price recommendation. Considering your feedback, the two of you will agree on the official listing price.
Confidential Business Review (CBR) - This document describes the value of your business, the opportunity it presents to prospective buyers, and business financials. It is the cornerstone of the marketing strategy.
Stage 2 Outcome: The listing price is finalized, and the business is listed for sale.
Stage 3: Attracting prospective buyers and qualification
Connect with prospective buyers - Your agent will receive inquiries based on their marketing outreach. Each prospective buyer must sign a nondisclosure agreement (NDA) before receiving a copy of the CBR.
Narrow the field - Your agent will begin interviewing prospective buyers to qualify their interest, fit, and determine if they meet the financial requirements.
Meet with prospective buyers - In most cases, the buyers need to speak directly to the business owner. Your agent should participate in these meetings.
Stage 3 Outcome: Offers from qualified prospective buyers.
Stage 4: Negotiation and Due Diligence
Receipt of offers - Review each offer in careful detail with your agent. Depending on the size of the deal, it may be necessary to get a CPA or attorney involved.
Identify financing sources - The prospective buyer may need outside funding to secure the funds necessary for the purchase. If they require an SBA loan, this is a good time for your agent to connect them with an approved SBA lender.
Counteroffer - Several areas can be negotiated beyond just the purchase price. Assets, inventory, accounts receivable, and training of the new owner are just a few examples.
Accepted offer and earnest money - Once both parties have agreed to the terms, it is time for the prospective buyer to submit their earnest money payment.
Approved financing - If they need outside funding, such as an SBA loan, the lender may complete a formal valuation of your business before they agree to fund the loan.
Stage 4 Outcome: Accepted offer and earnest money deposit.
Stage 5: Closing documents and transfer of funds
Resolve outstanding contingencies - Any unresolved contingencies by the buyer or seller must be resolved and acknowledged.
Closing documents - An attorney recommended by the agent typically drafts these. The closing documents outline the specific steps needed to complete the sale.
Funding escrow - Once the outstanding items are completed, the buyer or the buyer's lender sends the funds to the designated escrow agent.
Finalization - All documents are completed, signed, and the deal is funded.
Stage 5 Outcome: The seller receives their funds.
Reminder: An important note, these are general guidelines. Each business transaction is unique and has its own requirements. Therefore, some of these steps will vary in every transaction.