After you have made the decision to sell your business, the next most important step is choosing a professional to help you set the asking price, then package and market your business. Having helped countless buyers find a business to acquire, I have seen that many businesses on the market established the price based on what the seller thought was right, with the seller having no experience or training in establishing a price range for a business.
The other significant challenge is a broker/intermediary often puts very little effort into packaging information to sell the business. BizBuySell.com, which bills itself as “The Internet’s Largest Business for Sale Marketplace,” says that 80% of businesses listed don’t sell – not surprising, given the price is usually not relevant to the market and very little thought or effort goes into the packaging.
Most brokers/intermediaries will list a business for what the seller thinks is the right price just to get the engagement, rather than educate the buyer on what the market dictates. This is not in the best interest of the seller and wastes everyone’s time in the process.
When a buyer has zeroed in on your business, signed a non-disclosure agreement and been qualified by the broker/intermediary, the buyer does not want to chase down information needed to evaluate the business and determine if a closer look is warranted. More often than not, the buyer “may have” provided the past year’s P&L, in many cases without a balance sheet, and perhaps a worksheet to show normalized earnings. This common situation coupled with no professional packaging, misses the opportunity to boast about the attributes of the seller’s business.
As the seller who is paying the commission, you want to find out – without showing your hand – how the broker/intermediary packages businesses. You should be concerned if your broker/intermediary does not have a list of items needed from you that can be recited at the drop of a hat.
Having all the information ready to send to prospective qualified buyers at the time they inquire, from a secure online data room, will take advantage of an initial interest in your business. Time kills deals – it’s vital to seize the opportunity when it presents itself.
It is amazing how some sellers won’t release any information until they met the prospective buyer. Not a real smart sales process, and shame on the broker/intermediary for not educating the seller. Almost all buyers will just move on.
The minimum information that should be professionally packaged, ready to share with a prospective buyer, includes: the prior three years’ Y/E financial statements and the current year’s latest (YTD); prior three years’ federal tax returns with all attachments; worksheet showing month-by-month sales for the prior three years and the current year; copy of the business premises lease with all addendums/renewals; list of the top 10 customers by sales volume (without names), showing each one’s percentage of total sales for the prior year; a list of employees (without names), showing salary, job function, and tenure of each; a copy of any dealer or franchise agreement, if appropriate; and an overview sheet explaining the nature of the business.
If you would like a confidential conversation about how to prepare your business to be sold, feel free to contact me at 888-893-6661 or firstname.lastname@example.org. My LinkedIn profile is: http://www.linkedin.com/in/dolansales.