The Process of Selling Your Business

Page 1: Valuation & Structuring a Sale Price
Page 2: Marketing your Business - Confidentiality
Page 3: The Marketing Package
Page 4: Offer, Acceptance, and Due Diligence
Page 5: Sale Documents and Escrow

Valuation

The value of any business is the price and terms that a buyer is willing to pay, and a seller is willing to accept for that company. That being said, an experienced business broker will have the ability to provide an opinion of value that reflects what a purchaser would expect to pay, given an arm's length transaction. There are many valuation methods, and one must be careful to incorporate the many factors unique to each business. More often than not, simple industry "rule of thumb" evaluation methods are not applicable to your business. Although it is customary to use an earnings ratio to determine value, there are many reasons for that ratio to vary.

For Example:

• Provable income has a higher perceived value than non-recorded income;
• Repeat revenue has a higher perceived value than does one-time sales;
• A well diluted customer base has a higher perceived value than a customer base that includes one or two customers accounting for the bulk of all sales.
• Industry trends, company trends, company history, equipment value and condition, capital requirements, barriers to entry, intellectual property, employee turnover, and owner's duties are just a few of the factors that will impact a company's value.

Establishing a fair price with terms competitive with other businesses for sale will help you achieve successful results. Your business broker or other professional will work with you to find that range.

Structuring A Sale Price

Alas, establishing a price is only a piece of the puzzle! Market value is usually determined with the assumption that the seller will offer terms compatible with the current market.

If you are considering retirement, offering longer than "market" terms may be advantageous to you, as well as increase your likelihood of finding a qualified purchaser.

If you are in a situation where a cash sale is the only feasible alternative, your business broker can work with you to explore various sales structures including assumption of liabilities by a purchaser as a method of payment, third party financing, or discounted sales prices.