8 Business Acquisition Steps for a Smooth Process
A business sale is a huge financial decision, and it requires a large time investment. To maximize the price you receive for a sale, you need to understand the steps required to sell your business.
A business broker can guide you through the process, and help you make more informed decisions. Consider each of these eight steps, and how a broker can help you move toward a successful company sale.
1. Enhance the Value of Your Business
Review your business, and make changes to increase the value of the business before a sale. You can use technology to increase efficiency, or increase sales by adding new product offerings. Here are some strategies to increase company value:
Solve More Customer Problems
Use surveys, data from customer support calls, and in-store conversations to find out more about your customers. Find out why they do business with you and uncover other problems that your products and services can solve for clients.
Develop a Niche Business
Become the go-to business in a particular niche. You may face less competition, and you’ll develop more knowledge about customer needs and preferences.
Offer a Great Online Experience
Maintain a website that is attractive and easy to navigate. If you sell products online, build an eCommerce system that is simple and easy to use. Provide useful content (blog posts, videos) that drive customers to your site and keep them engaged.
A growing percentage of sales are completed online, and a great website can generate repeat business.
If you can provide a business model that a buyer can use to scale the business, you can close a sale at a higher price. Buyers are also interested in businesses that generate consistent profits, recurring revenue, and high levels of cash inflows.
2. Review Your Contracts and Recordkeeping
When you find an interested buyer, you’ll have to provide a number of documents for the due diligence process, review all of your contracts and agreements, and verify that you have the most current version of each document. You will also need to assess your accounting records, and verify that you have accurate financial statements available.
Brokers know which documents are most relevant for due diligence, and your broker can help you gather and organize your important documents.
3. Determine the Assets That are For Sale
Are you selling the equity in your business, or will the sale only include certain assets? Determine what you are willing to sell, in order to properly market the assets to a potential buyer.
Have your CPA review your balance sheet, and make any necessary adjusting entries. Each account balance in the balance sheet should be reconciled. Once the review is complete, your assets should reflect current market values, and the liability balances should reflect the current principal balance due.
4. Document the Value Proposition
Owners need to create marketing materials that explain the value proposition of their business. What company traits can a potential buyer use to drive sales and profits after the purchase? If you highlight the differentiators in your business, you’ll stand out from competitors and drive a higher sale price.
Your broker can help you create a marketing package as well as a marketing strategy to find interested buyers.
5. Write a Letter of Intent
Letter of Intent (LOI) is a document written by the buyer and seller that outlines the terms of the prospective business purchase
The first step in the bidding process is to collect term sheets, which outline the buyer’s intention to purchase the business. This step helps you determine if the potential buyer is a serious bidder for your company.
Next, set a due date to collect the LOI. In this document, the buyer outlines the purchase price, terms and conditions of the sale, and establishes the exclusivity period to work on due diligence, through to closing.
A buyer should be willing to begin due diligence after the buyer and seller sign the LOI. In addition, the purchaser may put down an escrow deposit to hold exclusivity while conducting due diligence.
6. Complete the Due Diligence Process
During the due diligence process, the seller discloses details of the business to the buyer. Due diligence includes financial statements, marketing plans, organizational charts, customer lists, and any contracts and agreements used to operate the business.
The time required to complete due diligence is important.
The seller needs to provide the requested information and make sure that the buyer is not extending the due diligence beyond a reasonable expectation. A broker can help keep the due diligence process on track and move the process toward a sale.
7. Finalize a Purchase Agreement
The purchase agreement is a contract that details the terms of the business sale, and the representations made by both the buyer and the seller. It’s critically important to use an attorney who specializes in writing contracts and has experience with mergers and acquisitions. You need a legal expert who can protect your interests in a sale.
8. Closing the Sale
In the closing, the seller transfers ownership of company assets to the buyer, and the buyer pays the purchase price.
Your broker can help create a closing and transition checklist, which will help the buyer with a successful transaction. An experienced broker can provide guidance to the seller on best practices, and what to expect during the closing, and will be with you through every step of the sale.
Work with a Trusted Advisor
The business experts at Raincatcher will work as your advocate throughout the sale process. Their business brokers have worked on thousands of business sales, and they have experience in dozens of industries. A business broker will help you make better decisions and will keep the process moving forward to a successful sale.
Ask Raincatcher Today to help you sell your business in less time, and with more peace of mind.