Selling a business is a complicated process. Following a plan simplifies the process and increases the chances of a successful sale. If you want to sell your business fast, then you must follow a plan and execute it well.
A business summary is a 10- to 20-page overview of your business that answers the key questions every buyer asks. You email this to interested buyers that have signed a non-disclosure agreement. The business summary is not just a document. It is part of an overall strategy to sell your business.
Ideally, the business summary should be prepared by a professional that has experience selling businesses and understands what buyers look for when buying a business. The business summary is difficult for you to write because you are your business. You are likely unaware of the strengths and weaknesses of your business because you are so close to it. A professional offers perspective and experience that you do not have.
A professional can also help you with strategies for marketing your business for sale, determining a price range, structuring a deal, reviewing of key documents, identifying potential deal killers, and making other important recommendations. This advice is priceless.
Having a business summary can reduce wasted time with buyers more than 90%. This figure is based on our experience helping sell hundreds of businesses. This is the key to selling your business fast. It ensures the sales process is smooth and professional. It can also increase the value of your business and may reduce post-sale litigation.
Preparing a business summary is the foundation of the entire process of selling your business. All other steps depend on step one.
Read more about the process of preparing a Business Summary and see a sample.
You should have identified the ideal buyer when preparing your business summary. Knowing who the ideal buyer is requires a full understanding of your business and your industry. Does the buyer need experience in your industry? If so, then you should advertise in trade publications and other media that is read by those in your industry. If they don’t need experience, then you can employ a wider range of marketing tactics to attract buyers.
Once you have identified who the ideal buyer is, you must now create a plan to attract that buyer.
If you want to sell your business fast, then you should not rely on one method alone to attract buyers. There are three general ways to find buyers:
One: You can approach them directly through phone calls, email or fax. This approach works best for businesses priced at more than $1million. You need a list of targets within your industry and their contact information. Ideally, a third party should make the contact so you can maintain your confidentiality.
Two: You can advertise your business for sale to those in your industry. This includes trade publications, magazines and other media that targets your industry. Industry buyers usually pay less for a small business (priced less than $1million), because they are not willing to pay for goodwill and they already have experience, so they cannot see value in your training. Brokers seldom advertise businesses using this method because of the high cost and low offers generally received. This may be the best option for businesses in certain industries requiring a buyer with specific experience (medical, law, engineering and other professional services). A third party should field the phone calls and emails to maintain your anonymity.
Three: You can advertise your business to those outside of your industry. This is the most common advertising method used by business brokers. This method primarily includes print and web media. Print media usually involves newspaper advertising, which is no longer effective. It is also very expensive. Advertising your business on the web can also be expensive unless you are a broker. We have created an alternative for business owners looking to sell their business and want to advertise it using the methods brokers use. Unfortunately, there are about 15-20 popular websites that sell businesses, so if you want the most exposure possible, then you should advertise on all of these popular sites. This can get expensive really quick and can easily exceed $1,000 per month.
The most common mistake business owners make when selling their business is not screening buyers. Even when they do screen buyers, most do it incorrectly.
Most buyer inquiries come in through email. The proper way to handle these inquiries is simple. Prepare an email template to use when you get an inquiry from a buyer. Typically, the buyer will ask additional questions and want to see more information. This is normal. Your email should include a “little” more information about your business and a request for the buyer to sign a non-disclosure agreement before giving them the business summary.
The only purpose of your email is to get the buyer to take the next step, which is to sign your non-disclosure agreement. Your email should include a copy of your ad so that buyers remember what they replied to. It should only include basic information about your business. Keep it short and simple. It is important that you mention in your email that you have a complete business summary available for buyers who have signed a non-disclosure agreement.
This approach will immediately eliminate buyers that are not serious. Buyers that aren’t sufficiently motivated will not sign your non-disclosure agreement. This step eliminates most of the buyers that aren’t really serious about buying a business.
How do we screen buyers financially? Your non-disclosure agreement should be simple. Many experienced brokers make the mistake of asking the buyer to sign multiple documents and to fill out lengthy forms before seeing any information on the business. Remember, we are only screening buyers for motivation and money in this step; nothing more, nothing less. There are two key questions to ask buyers on your non-disclosure agreement – How much liquid cash do you currently have? What is your net worth? Nothing else matters at this point. If the buyer needs experience in your industry, then I would also include that question. This simple approach saves both you and the buyer time and allows you to focus on the criteria that really matters.
Email the business summary to buyers you have determined are qualified. We recommend calling the buyer one time along with the email. Make it a friendly call and tell them they can call you anytime if they have questions.
Wait for interested buyers to call you. Don’t chase buyers down. If a buyer likes your business and is serious about buying a business, then they will follow up with you.
What do I do if the buyer emails me with questions? If the buyer emails you a question or two, then it is ok to answer them. If the buyer emails you a list of questions, then set up a meeting with the buyer, period. Do not email back and forth. Dealing with buyers is a dancing act. It is a give-and-take. The buyer signed your non-disclosure agreement. In return, you provided a professionally prepared business summary on your business. Now, you should ask that buyer to take an hour out of their schedule to meet you. If the buyer is not willing to travel to see you after seeing the business summary, then we recommend not wasting time with them.
If the buyer insists on receiving additional information without meeting you (I am too far away, too busy, just a little more info, etc.), then ask the buyer to submit additional information to you as well. This can include a resume, financial statement, credit report, etc. Remember this should be a give-and-take process.
As you provide more information to the buyer, you will also screen them more thoroughly. This should be a gradual, natural process, and there are no hard and fast rules for when to do this.
Get the buyer to make an offer. Circumstances differ, although most buyers will make an offer after one to three meetings if they are really serious. Use your judgment.
Keep asking the buyer for an offer. If they are serious, they will make one. An attorney is not needed to draft an offer at this stage. Focus on the key terms and get them accepted, then you can have an offer drafted.
Make sure the buyer has the money before spending too much time negotiating with them. Alternatively, you can ask that the buyer submit proof of funds along with the offer. This is probably the best approach as few buyers are willing to disclose such personal information before they are truly interested in your business.
If you accept an offer, then be sure that the due diligence is mutual. This means that you have a right to inspect the buyer’s background, financial condition, etc. This gives you an out if you find out something about the buyer you do not like.
It is helpful to have a professional involved in the process of negotiating an offer. They can help point out potential pitfalls and also facilitate the process.
Know the buyer’s expectations during due diligence. Ask for a due diligence checklist along with the offer. Over half of deals die during due diligence. Why not know how stringent the buyer’s requirements are before accepting an offer?
Start getting organized for due diligence. Use a checklist and start making copies of documents and organizing them.
Due diligence should be a routine process if you have adequately prepared. The key to due diligence then is preparation. Stay on track, be organized, keep a checklist and keep the momentum going. But at some point, the buyer needs to pull the trigger. Buying a business is not without risk. A buyer cannot minimize risk 100%. A buyer must be willing to assume some risk. If you are financing the sale of your business, then point out to the buyer that you would not finance the sale if you were also knowingly making misrepresentations about your business. Eventually, these misrepresentations would surface and the buyer may (depending on the state) offset these against your note.
A professional can review your business and point out potential deal killers. They can also create a custom due diligence checklist for your business. You could use this checklist to prepare for due diligence before you receive an offer. This can actually be used as leverage with the buyer.
Along with due diligence, closing the sale should also be a routine process. Prepare for the closing weeks in advance. Checklists and timelines keep the momentum moving and the parties organized. Stay organized and take action daily towards the closing. If you have not handled the closing of a business before, then we highly recommend getting help.