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Established Canadian businesses - For Sale by Owner - in Canada

 

 
An Overview of the
Business Selling Process

"We Help You Sell Your Business"

 

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• 0. Selling your Business during the COVID-19 Crisis.  
 
• 1. Should I sell my business ?   Take this Quiz ....
 
• 2. Get Ready to Sell Your Business.  
 
• 3. 3 Key Considerations to Create an Effective Business-for-Sale Ad.  
 
• 4. The importance of photos in effective advertising.  
 
• 5. The Ad Title that Sells the Business.  
 
• 6. How to Choose Effective Categories for your Listing.  
 
• 7. Selling your business: ASSET sale or SHARE sale ?  
 
• 8. Some Hints for you When Selling your Business.  
 
• 9. How to Respond to Buyer Inquiries .  
 
• 10. Qualifying Buyers: Separating the sharks from the keepers.  
 
• 11. Ten things I should know when negotiating !  
 
• 12. Will I Get Top Dollar When I Sell My Business ?  
 
• 13. Prepare your Business for your Ultimate Customer.  
 
• 14. Is Your Business a Pain, or a Pleasure ?  
 
• 15. What Drives Owners to Sell & Buyers to Buy ?  
 
• 16. Frequently Asked Questions - by Jim Clark  
 
• 17. An Overview of the Business Selling Process.  
 
• 18. Recasting - a key to building value to the seller.  
 
• 19. What the Profit & Loss Statement Doesn't Tell You.  
 
• 20. How Do Buyers Determine Value when Considering a Business Purchase ?  
 
• 21. Why does Confidentiality Matter when Buying or Selling a Business ?  
 
• 22. Should You Buy an Existing Franchise?  5 Questions to Ask  
 
• 23. Succession Planning is central to selling success  
 

 
 DISCLAIMER 
 
These articles are for general information purposes only and do not constitute legal, accounting or other professional advice.  Important financial and legal decisions should be made only after seeking appropriate professional advice based on your specific situation.
 Overview of the Business Selling Process


 
There are different approaches to selling a company, but we have found the following steps should be followed to maximize the selling price and maintain confidentiality during the selling process.
 
Selling a small business is one of the most important events in the life of an entrepreneur.  For many, it is a once-in-a-lifetime opportunity to reap the financial rewards of years of hard work and sacrifice.  The financial consequences are greater and have more lasting impact than any other financial transaction the seller ever made.  The result of the sale can be either ruinous or rewarding, financially and emotionally.  With the stakes so high, it is absolutely critical for the business seller to have a sound plan for selling the business.
 
This step-by-step system has been proven to work in countless business sale situations.  One of the great things about this plan is that, if the business owner sticks to it, most of the major pitfalls of selling a business can be avoided.
 
(1) Valuation - Determine how much the business is worth.  Do you really want to sell?  Is now the right time?  Use commonly accepted methods to set a selling price for your business.
 
(2) Prepare the business for sale - Gather financial statements and tax returns, develop recast financials, and generally spruce up the business prior to putting it up for sale.
 
(3) Find potential buyers - Now it’s time to find some interested buyers.  How do you determine who are the best buyers?  And how can you reach them?  Also important - how can you keep the planned sale secret from competitors, employees, suppliers and anyone else who shouldn’t know about it at this time?
 
(4) Screen potential buyers - If you’ve done step three properly, you have a group of people who have expressed a preliminary interest in buying a business such as yours.  Many are sharks, a few are kooks and many are wannabes, a lot of them don’t have enough money to do a deal, a few are competitors and suppliers - and a small number are qualified buyers.  It is absolutely critical to qualify potential buyers prior to giving out any information about your business.
 
(5) Provide a selling memorandum to potential buyers - The selling memorandum is an extremely important document.  It must combine salesmanship and truth, putting your business in the most positive light.  It sets the stage for all future negotiations and plays a major factor in how much you’ll be paid for your business.
 
(6) Provide initial follow-up information to buyers - After receiving the selling memorandum, buyers will have follow-up questions.  These can be minimized with a well written selling memorandum, but questions invariably come up.
 
(7) Meet with potential buyers - Since this requires effort on your part and the buyer’s part, if you reach this step it implies a good level of mutual interest.  Caution: Just like there are weird people who get a charge out of attending funerals, there are a small handful people who get some unexplained joy from touring companies for sale.  Since preparing for a seller visit takes a great deal of time and planning, make sure visitors are qualified.  This is especially true if potential buyers are local.  In some cases, it’s advisable to get a letter of intent prior to a visit.
 
(8) Letter of intent - A buyer should now have all the information needed to provide you with a letter of intent.  The letter lays out the deal structure including offering price and terms, as well as other important information.  Although it is generally not legally binding, a LOI is a written promise to follow through with the deal if due diligence shows all the information you provided to be substantially correct.
 
(9) Select first choice, evaluate letters of intent - Now comes the interesting part, where you evaluate the deals in the letters of intent you’ve gathered and put them in the order you wish to deal with them.  It is considered unethical to deal with multiple buyers, so you negotiate with only the top buyer (for a limited time) and if that falls through, you move onto buyer number two and so on.
 
(10) Due diligence and negotiating with the buyer who is your first choice - Now your number one prospect has the right (for a limited period of time, no more than 4 to 6 weeks and preferably less) to dig as deep into your business as they need to in order to feel comfortable writing the big check.  Intensive scrutiny of financials, physical inventories and even interviews with key employees may happen here.  It’s stressful, but you can survive due diligence.
 
(11) Complete the sale - One of the most exciting and nerve wracking days is closing day.  It’s similar to closing on a real estate sale, but usually more complicated.  Deals can still fall through at this stage, but with the right professional help, the sale is usually completed.
About the author: James Laabs is an experienced business seller and author of the book The Business Sale System: Insider Secrets To Selling Any Small Business

This Article is copyright © 2006 Business Sale Center



 
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