The Selling Experience
Selling Your Business is Your Decision. Your Timing. Your Move.
CBI utilizes a confidential approach that maximizes the value of your business, while keeping you informed and in control through each step of the process. We educate both the buyer and the seller while anticipating any problems that come between our clients and the transaction closing. We understand the concerns of both buyers and sellers and the emotional impact of sudden change. Consequently, we define a successful business sale in terms of a successful transition.
Business owners that have sweated and sacrificed to build a company usually have little experience in selling a business. But for most owners, the sale of a business will be the single largest financial transaction of their lives. The following are some of the most frequently asked questions about the process. We want to hear your questions about selling your business, so please contact us.
What is the purpose of an opinion of market value?
How is an opinion of market value determined?
How will I know when it’s the right time to sell?
Why should I use a business broker?
How do I prepare to sell my business?
How will CBI market my business?
How long will it take to sell my business?
How do I know my business financial information is confidential?
How many other business clients are handled at the same time?
What do you mean that the firm’s financial statements are recast?Can you give an example? Why would this be necessary?
What is Due Diligence and why is it important?
Why is financing an important part of the sale of most businesses?
Why should I select CBI?
What is the purpose of an opinion of market value?
An opinion of value can play a key role in helping you achieve your financial goals. Establishing the correct business value justifies for the business buyer that the recommended price of the business is fair and to the seller that the business is priced to obtain maximum value. A realistically valued business is more likely to sell within an anticipated timeframe. A value that demonstrates the ability of the business to service debt allows lenders to pre-approve acquisition financing and boosts the confidence of the buyer and the banker in an acquisition decision.
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How is an opinion of market value determined?
Valuing a company simply by looking at its current level of revenue or earnings will not result in capturing its true worth. A variety of tangible and intangible elements impact its value. Value is derived first by reviewing the financial performance of the business, secondly a summation is needed of the total “use of cash” that benefits the current owner, then we review the industry the business is in and where the business sits within the industry. We impact that total by the cost of capitalization and then develop a “multiplier” which is applied to our compiled adjusted earnings total.
CBI uses a proprietary database of comparable transactions when developing an opinion of market value. This database is an excellent tool based on current marketplace conditions. CBI is the only firm with the ability to demonstrate likely sales scenarios to our seller clients prior to an offer on a business.
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How is an opinion of market value determined?
Finally, we study the true market value of the firm’s assets and add that asset total to our valuation computation. We always check our resulting business market price by verifying that our suggested sales price can be financed using standard bank financing ratios.
CBI utilizes a private transaction database resource that provides detailed information on the sales of “main street” and middle market privately held companies.
This resource provides current financial data of comparable transactions to help determine actual value in the marketplace for each of our client companies.
The CBI team takes the time to thoroughly understand each client’s business and the current marketplace for their products or services. CBI has earned a reputation for achieving the highest business valuations possible for its clients.
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How will I know when it’s the right time to sell?
It is time to sell when you no longer have the drive, energy, health or motivation to take your company to the next level. The biggest single mistake sellers make is waiting too long to begin the selling process.
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Why should I use a business broker?
When it comes time to sell, one of the best decisions a business owner can make is to continue to manage his or her business efficiently, while depending on the skills and services of a business broker to orchestrate the sale.
Any business owner who has attempted to sell a business on his or her own will tell you it is a tedious and stressful process. It consumes time and distracts from the day to day operations of the business. When your focus should be on increasing or maintaining the value of your business, all of your energy and time is directed to the sales process.
It is extremely difficult for a seller to sit across the table from a prospective buyer and negotiate a successful transition. The use of an intermediary places a professional between the buyer and seller which removes the emotions from the process and allows negotiations to proceed smoothly.
A sale facilitated by a business broker will usually result in a higher sales price achieved by the seller. In effect, a business broker will usually achieve a price high enough to cover his fees. Further, an experienced business broker has the ability to confidentially expose the business to a significantly larger universe of buyers than a seller, working on his own, could ever hope to do.
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How do I prepare to sell my business?
For many business owners, the prospect of selling a business after years of pouring every effort into growing the company can be emotional and difficult. Selling a business is a one time event. Preparation is a key to a successful sale.
Put your financial and business records in order.
Be sure all records are up to date. You want all of your hard work to pay off in the sale of your business, so be sure you have current, detailed records that provide an accurate assessment of the company’s financial position and, if possible, future projections of the firm’s performance
Other documents a buyer will expect to see include:
- Income statements and balance sheets for the previous three to five years. Income tax returns for the last three to five years. Buyers won't pay for anything you can't prove, so don't expect to be compensated for "unrecorded profits."
- Leases for real estate or equipment.
- Contracts with major customers and suppliers.
- Pertinent patent or trademark information.
- Insurance policies.
- Fringe benefit agreements with employees.
- A compilation of all monies that you the owner enjoy from the business. This could include salaries, benefits, vehicles, and all other personal uses of company cash
Remember your staff is an important asset.
The loss of key employees during a sale can kill a deal. Key employees may be crucial to the ongoing success of the company. Assess which employees are prepared to stay with the company through the transition.
Assemble a team of experts.
No matter how independent you are, the sale of a business isn’t something to handle on your own. Keep in mind that the sales performance of the company during the time it’s on the market is crucial, so working with an experienced business broker to sell your business will allow you to focus on the on-going operation of the company. Your attorney and your accountant are key partners in completing a successful sale.
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How will CBI market my business.
Every business is unique. CBI’s results are attained by developing an aggressive marketing program designed for your specific business.
- We maintain an up-to-date database of qualified buyers, sellers, and professionals, all of whom receive timely publications appropriate to their respective interests.
- We periodically acquire high qualified lists to source new potential buyers who are well suited to match specific businesses.
- We make extensive use of the internet, utilizing our proprietary website and several industry specific sites, to ensure maximum, confidential exposure designed specifically for your business.
- When advisable, we advertise in recognized trade journals and national publications for additional exposure in the marketplace.
Based on the information gathered during a business review, CBI will draft two documents…..The Business Summary and the Confidential Business Review. Both documents must be approved by the seller before being implemented.
Business Summary: This two page document will describe the business in generic terms, and is carefully written so that the reader is not able to identify the business. The advantage of the Summary is that it can be given wide distribution without breaching confidentiality. This document is distributed to CBI’s professional database of accountants, attorneys, bankers, and private equity groups. It is also posted on several transaction websites that specialize in the sale of privately held businesses. Further the Summary is distributed to our brokers’ significant inventory of registered buyers.
Confidential Business Review(CBR): This document is a comprehensive description of the business, including history, product information, trends, marketing, financials, and opportunities for growth. It is designed to provide the reader with enough information to know if he or she would like to own the business. However, because a CBR directly identifies the business and may include confidential data, it will only be distributed to prospective buyers who have registered with CBI, provided data about their financial position, and signed a confidentiality agreement. In a typical assignment, only 2-5 specifically selected potential acquirers will receive this document.
Marketing Plan: CBI develops a comprehensive marketing plan for each listing. This plan includes a buyer profile and an action plan to attract the right buyer. The plan will also include any strategies for advertising and targeted industry mailings.
Documentation Approval: After the Summary, CBR and Marketing Plan have been completed, CBI meets with the seller to seek approval of all three documents. It is important to stress that the client is in control of the entire selling process. The client must approve what is said about the business, as well as to whom data may be shown. The client may choose to exclude a person or company from receiving the marketing documents.
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How long will it take to sell my business?
On average, CBI’s experience is that it takes an average of 10-12 months to sell a business. The confidential nature of the process is one factor that often prevents a transaction from closing more quickly. There may be financing hurdles to overcome as well as a need to secure real estate appraisals, environmental reports and building inspections. The CBI team handles the time and effort involved in selling your business so that you can stay focused on managing your business. We will be with you to overcome obstacles each step of the process and to celebrate your successful exit.
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How do I know my business financial information is confidential?
Nothing is more important to us than the privacy of our clients. We work hard to manage the release of sensitive client information. Information is shared on a need-to-know basis with strict adherence to our Privacy Policy.
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Every prospective buyer is required to sign a Buyer Registration Agreement which details his or her legal responsibility for confidentiality prior to access to your company information. A prospective buyer is also required to provide a personal financial statement. This information is carefully reviewed by CBI. Our Buyer Registration Agreement serves the dual purpose of pre-qualifying a prospective buyer and discouraging frivolous inquiries.
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How many other business clients are handled at the same time?
CBI works with only a select group of clients at any given time and concentrates exclusively on capturing stockholder value for owner-managed enterprises.
Because we succeed only when you do, our investment in each assignment is considerable. This means that we personally research, negotiate, and manage each engagement.
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What do you mean that the firm’s financial statements are recast?
Most owners of privately held businesses manage their firm’s financial information to minimize taxes unlike a public company motivated to report the highest profits possible. Business owners will often charge expenses to the firm that only benefit the owner. The most common are vehicle expense, family member’s cars, family cell phones, travel and entertainment (beyond true business expenses), excess insurance, family members on the payroll, etc.
An experienced business broker will go through every line item on the financial statements and pull out, or “recast”, those expenses that exist only for the benefit of the owner. The goal is to demonstrate the “recast earnings” or true cash-flow of the business before interest, taxes, depreciation, and owner’s discretionary expenses, or EBITDO.
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What is Due Diligence and why is it important?
Merriam-Webster Dictionary defines due diligence as “research and analysis of a company or organization done in preparation for a business transaction.” Due Diligence is the process of being certain that things are as presented before a deal is sealed. Due Diligence is a complex process that can be time-consuming for sellers. For someone considering a merger or business acquisition, the review of documentation and answers to
Due Diligence is a critical part of the transaction. During the Due Diligence process, the list of documents the seller provides will cover a range of areas, including:
Legal structure and incorporation of the company
Corporate tax returns
Internal Revenue Service (IRS) records
Insurance policy information
Organizational structure
Personnel policies
Operations
Capital and real estate
Contracts, licenses, agreements and affiliations
Technology and intellectual property
Current or potential legal liabilities
Marketing materials
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Why is financing an important part of the sale of most businesses?
A portion of the sales price of virtually all businesses is financed. The simple reason is that buyers rarely have enough capital to pay cash for a business. If they can leverage their cash and finance a portion of the sales price, the buyer will be able to acquire a larger business with more cash flow. With the financing participation of a commercial lender and, usually, some seller financing, the buyer will be able to meet operational expenses, debt service, and finance growth plans.
With a seller’s participation in financing, the chances of selling a business increases dramatically. The time period between listing a business as available for acquisition and closing the transaction greatly decreases. Some seller financing communicates to a buyer that the seller has confidence in the business and it is as solid as it has been presented to be.
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Why should I select CBI?
Because we succeed – our measurement of success is completing your transaction. We are one company with 20 highly skilled professionals experienced in every phase of the business sale process. We have represented a broad range of businesses in most industry sectors over the last 30 plus years. Our associates have the experience to handle your transaction with confidence and integrity.
CBI is selective in accepting our engagements, completing a much higher percentage of transactions than normally experienced in the industry.
CBI’s regional presence, with 13 company-owned offices, allows our associates to know the key players in each market, the accountants, lawyers, and bankers who will work together as a team to achieve this measure of success.
CBI’s industry affiliations expand our network of potential buyers, making us the only regional business broker with international reach.
CBI’s brokers have earned the reputation of achieving the highest price possible while creating a win-win transaction.
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