Exit Strategy
Some of the steps occur simultaneously, so it can be a relatively quick process if both buyer and seller are motivated to perform the steps in a timely fashion.
STEP 1: Deciding To Sell Your Business
The decision to sell your business can be life altering. The first step in selling a business is self-discovery of your motivations. Ask yourself why now? Have you achieved what you set out to accomplish? Is it for retirement or possibly just time to move onto a new venture in life? At Frontier Business Acquisitions, we want to support you in transitioning to a new stage in life with the comfort of knowing you did it on your terms.
STEP 2: Owner Interview & Business Valuation
For a Confidential Consultation with a member of our team, you don’t necessarily need to have finalized the decision to sell. It’s a conversation where we can find out more about your business and give you a ballpark figure on a potential sale price. Then you can decide whether to have a more in-depth discussion and potentially set up a meeting.
When selling a business, it is important to understand what the right buyer is willing to pay. Care must be taken to ensure pricing is attractive, but provides you satisfaction in knowing top dollar was achieved. At Frontier, we help value your company while setting realistic expectations of what the market will potentially pay. Before you release your financial information to us, we can sign a confidentiality agreement. Then we’ll request the last three years’ tax returns and a current year to date profit and loss statement. We’ll also want to understand what your total owner’s income is including your salary, benefits, perks, and net income. We will take a look at the trends in your business and ask you some more questions about the company to get a full picture of the growth opportunities for the business. Other items include the approximate value of the assets of your business, including inventory, equipment, etc.
STEP 3: Secure Listing Agreement
Next step will be for us to get a signed agreement from the seller to engage with selling their business. Usually, at this stage, we have enough information to start working on the initial marketing documents. A document called a confidential information memorandum (CIM) will be created. This document will contain specific information about your business and will be shared with potential qualified buyers who sign the NDA.
We will use our expertise to create both marketing documents, but we’ll certainly need your assistance in providing us with information. We welcome your opinion and suggestions. After all, it’s your business, and no one knows it better. We’ll need enough information to present the company in a favorable light designed to get people interested while also providing a realistic picture of the business. This document can grow over time as we get more information and answers to questions from buyers and gain an in-depth understanding of the answers to questions that buyers have about your business.
STEP 4: List & Targeted Marketing
We will advertise and market the business in several ways and in many places. In addition to advertising, we have a potential buyer database of buyers that we will contact.
We have companies in all industries that are expanding by acquiring companies as well as related companies that they can leverage to grow their business. Often they can take the products or services that you have and bring them to a broader market with their sales and distribution network.
STEP 5: Qualify Buyer
From our advertising and marketing, we always have a number of interested potential buyers in the industries. Before we provide details, they’ll sign a Non-Disclosure Agreement (NDA) and provide us with info on their qualifications. We’ll start to narrow down which buyers are qualified and interested so that we can provide details.
Typically we’ll need to have many potential buyers that we are in contact with before we find ones that are the right fit to acquire your company. They need to have the right skills, motivation, and want to acquire your specific company. Once they have the details on your particular location, products, or services, they may or may not be a fit to go to the next step in the Process of Selling your Company.
If there is initial interest from a qualified buyer, we will then discuss the business with them and answer any questions that we can for them. We’ll also get a feel for their timeframe and motivation as well as a greater understanding of why they are interested in your business specifically. When we have one that is a good fit, we’ll contact you.
STEP 6: Buyer – Seller Introduction
We will give you information on the potential buyer’s background and interest and set up a phone call or meeting with you. This is an excellent opportunity to find out more information on both sides. It’s also an opportunity to see if you can see this person taking over your business. So while they are deciding whether they are interested, you can also make up your mind on buyer as well. We’ll do our best to introduce people that we think you will be comfortable with, but at the end of the day, it is your decision.
During this meeting buyers will usually want to know about the expertise of your staff, your customers, suppliers, your role in the company, etc. Even though they have a lot of this information, they usually want to get more details directly from the seller before making an offer.
STEP 7: Finalize Offer(s)
Once buyers have enough knowledge and answers to their questions, we’ll find out which ones are serious enough to make a written offer. On most businesses, we sell we’re able to get multiple offers. We’ll go over each offer with you and discuss not just the price offered but other items such as the terms of the sale, due diligence requirements, and how likely we think the buyer is to close on the deal. We will take into account whether they need financing or not and their interest in moving quickly, and more. If you have several offers that we are discussing with you, together we may decide to focus on the best one or two to see if we can negotiate terms with one that will be most likely to close on the deal and see if they can provide terms that are acceptable to you. In addition to price and terms of the payments, we’ll also need to discuss how long of a transition period they want, what due diligence they will be performing, and what are their plans for running the company. Once the terms of the offer letter are agreed to, then both sides will sign a Offer Acceptance and Sales Agreement.
STEP 8: Due Diligence
The amount of due diligence that each buyer requests does vary depending on the size of the deal, the buyer’s background, and the available information. If there is bank financing involved, then the bank will also require due diligence information. Usually, the buyer will have their accountant review information and request information from the seller and their accountant. In addition to the financial information, they will want their lawyer to view any contracts that the seller’s business has with suppliers, customers, and employees.
Due diligence is designed to confirm that the business is what was stated to the potential buyer from the seller and broker. In addition, they want to see if there are things that could cause problems for the new buyers, such as pending lawsuits or a large customer that has canceled their contract. During the review process, the buyer and their attorney and accountant will have questions. When the information is reviewed, and the questions are answered to the satisfaction of the buyer, the next step in the business sale process is for the attorneys to negotiate the purchase agreement.
STEP 9: Closing
Once all details of the transaction are negotiated, we will schedule a closing date. Often the closing takes place at the escrow agent’s office with all parties present to finalize the deal and exchange payment. However, sometimes the closing is handled virtually with an electronic copy signed, and the funds are paid via wire transfer to a seller’s bank account. Understanding the steps before, during and after the closing are simple, yet important. We will assist by providing a checklist to ensure the process is painless and easy.
Congratulations, the deal is closed. Be prepared to transition to the next phase of life!
