The Business Selling ProcessLearn about the stages and process to sell your business
HOW TO SELL YOUR BUSINESS
FOLLOW OUR STEP BY STEP PROCEDURE
It is important for you to understand the business selling process as you will be a part of if you decide to sell your business with BCI Business Brokers. At any time, we will assure you of our absolute care and along the way deliver what you would expect from a professional in this field.
The key features of this care are:
- To explain to you what is happening every step of the way
- To offer you support you can count on
- To provide you with world class marketing
- To only deal with genuine qualified buyers
- To deliver efficient settlement
From our first meeting to the final signature of the sale: your interest is our interest. We have listed below all the different steps included in our business selling process:
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The Business Selling Process
First meeting: Presentation
Most times we will present our credentials to you in person. Our aim here is mostly to understand your business and its value, as well as find out what your goals are. At this meeting, you should tell us everything that’s on your mind, including your fears and aspirations. Then, we will present and explain our business marketing and sale process, so that you can make a preliminary judgement about whether you think BCI Business Brokers can provide the solution you are looking for. Quite often at this meeting, the seller of a business wants to know what the business is worth and we will do our best to offer a possible range of values, without undertaking a detailed valuation. Our range will be accurate and you will have something to work on when making your decision about whether BCI is the broker for you. We of course welcome any type of questions you may have at this meeting.
Before working together, we will sign an Agency Agreement that will contain all the terms that govern our business relationship from start to finish. You will be given a copy of that agreement before signing, in case you wish to seek legal advice. After the execution of the agreement, a copy will be given to you for your records. The Agency Agreement will also contain what fees and charges you will be up for, including any initial fee for preparation of the Information Memorandum, selling fee and marketing/advertising costs.
Second Meeting: Information Exchange
After the execution of the agency agreement, you and your BCI agent will work together to obtain all the information necessary for BCI Business Brokers to sell your business. Our philosophy is that the better prepared we are at the beginning, the smoother the transaction will be throughout.
This part of the process involves us providing you with an information request, outlining the data, documents, proofs and anything else we need to build a good case for the sale of your business. We don’t apologise for the level of detail we go into here, as this is the most crucial part of the sale process. The more prepared we are the better we are placed to provide timely information to buyers and to ensure that the sale process keeps moving along at the pace we want.
We will build an impressive sale document using our extensive knowledge of what buyers expect to see in such a document. We are happy to provide you with examples of this document and also welcome your input, although we ask you to rely on our experience as much as possible here in producing this document. The cost of this document will be quoted to you at our first or second meeting and is costed according to the amount of work required to complete it.
Marketing plan for your business
Once we have all the information and we are ready for the business to be exposed to the market, marketing will commence. A marketing plan for your business will be different to any marketing plan for any other business, and your input into the process is also welcomed. Below are the most commonly used avenues for introducing a business to a buyer:
- Advertising on a range of ‘business for sale’ web portals (specifically chosen by us for their high enquiry rate)
- Marketing the opportunity to appropriate people in our database of current and past buyers/prospects
- Directly approaching people outside our database, be they people from a list that you provide us with as potential buyers or people we choose to approach ourselves
- Using our social media channels to appropriately target potential purchasers or to broadcast the opportunity
It is important that only people who are entitled to see your business and its details actually see them. We might decide to develop a simple non-identifying one-page document to show prospects, prior to signing any Confidentiality Agreement, so that we can gauge their interest without giving them the whole picture. This is done to protect you and your business.
Also, if your business is competitor sensitive, we can always agree that no information is provided to a potential competitor or industry buyer without first checking with you.
Once a Confidentiality Agreement is signed by the prospect, an Information Memorandum and other early-stage information will be provided to the prospect. This will be via access to our online data room. BCI Business Brokers will be doing much of this enquiry work on your behalf. This process comprises much of the background work, that we as business brokers perform, from which you are spared.
Every case is different, however, it is expected that the buyer will want to meet with you either at our office or your business premises if suitable. If the meeting is on your premises it can be made after hours when staff are not around.
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Eventually, if all things go to plan, we will receive an offer on your business. We usually ask this offer to be put in writing to prove the legitimacy of the offer. There may be a process involving offer and counter-offer until finally there is agreement on price and broad terms. This agreement is then embodied in what we call a Heads of Agreement. Both parties will sign this Heads of Agreement and we will seek a nominal if not 10% of the purchase price deposit to be held in our trust account pending the exchange of contracts.
Of course a buyer is always undertaking a formal investigation of your business along the way and this is called due diligence. The more formal “due diligence” is the process of the buyer looking at documents that they may not have seen before due to sensitivity or other reasons to hold back during the standard enquiry stage. This due diligence can take place usually once a formal agreement is in place and it is not unusual to see the Heads of Agreement state that the offer is subject to “due diligence”. At this formal stage, a buyer will usually bring in their accountant or other adviser to assist in the investigation and will ask for an exclusive dealing period during which time the vendors agree not to sell the business to anyone else. Due diligence should be seen as validation or confirmation of information previously shown to a buyer.
Contract of Sale
A contract will be drawn up by the seller’s lawyer, according to the general terms of the Heads of Agreement. However, a contract will be more detailed, containing provisions and clauses designed to protect both parties and cover issues like warranties and other more technical provisions.
Exchange of Contract
Once both parties are happy with the terms of the contract, the lawyers will arrange to meet and exchange contracts. Once contracts are exchanged, the deal is sealed.
Between Exchange and Settlement
After the exchange of contract, the parties prepare for settlement. This can involve gaining consent to assignment from the landlord, franchisor or other authority. It can cover formal finance approval as well as anything else that needs to be done under the contract. This is the beginning of the handover.
The time before and after final settlement of the sale is called the handover stage. The seller is usually under obligation to introduce the buyer to all facets of the business. This is part of what the buyer is paying for. This handover includes meeting suppliers and clients, as well as being shown how to operate the business and anything else that needs to be transitioned during this period. Usually there will be provision for the buyer to start working in the business after exchange and before settlement. And the seller will remain after settlement to further assist. These training and assistance periods are usually short, so that if the buyer wants longer tuition and assistance period that needs to be paid for by the buyer.
Sometimes a seller will be asked to stay on in the business to earn what we call an “earnout”. This can be part of the purchase price that is paid after initial settlement, and may or may not be tied to performance of the business. It may just be there to ensure that the seller stays for this extended period and more fully hand over the goodwill etc.
Settlement of the Sale
Settlement of the sale involves final payment of all monies due on settlement and the handover of the business to the buyer. The buyer then takes the profit of the business and control over its operation.