Selling Your Business
The DBG Proven Sales Process
However, most business owners have never sold a company. Most business owners have never been through the process of selling a business, of thinking through the steps, understanding the details that make a successful sale go right and an unsuccessful sale go wrong. In short, they don’t know what they don’t know.
If you, like almost all the business owners I have encountered, are not a professional business broker, Mergers & Acquisitions advisor, or transaction attorney, you need help to create and secure a lucrative exit. Not only do you need to know what to do, you need to know what not to do.
A good exit advisor can help you plan for all the things that could go wrong. `Selling your business can be compared to being on a wagon train traveling through the wilderness. Every expedition needs a trail boss, someone who has gone over the terrain before. They know the lay of the land and they can help you see what is ahead. They know how to forge the rivers, traverse hazardous mountain passes, and are prepared to give guidance to inexperienced travelers.
DBG Advisors has experienced “trail bosses” who have guided business owners through the process of selling their manufacturing, distribution, and service businesses. Below is a description of the Business Sales Roadmap that DBG Advisors follows.
Clear Snap Shot Of Business
The first step that needs to be taken is to get a clear understanding of what your business is all about. We identify the industry you are in, get an understanding of your business overview, company history, financial history along with the facilities and equipment that you use in your business. With this information we can then have clarity about the investment opportunity that needs to be presented to prospective buyers.
During this phase of the process our advisors interpret the Sellability Score and PREScore both are tools from the ValueBuilder System that our clients are encouraged to fill out online. These tools help our clients evaluate their readiness for a sale and what they might expect in their life after the sale. All our advisors are Certified ValueBuilders and are trained in interpreting the outcomes of these surveys.
DBG Advisors also performs a Brokers Opinion of Value during this first phase in order to provide the business owner with a Most Probable Sales Price so they can have a clear picture of what their company could sell for on the market at the time they plan to go to sell. If you chose to do this Broker’s Opinion of Value, we charge $2,500 for this service and your have no obligation to move forward if you choose to have this done. DBG Advisors will role this fee into our retainer if you do choose to move forward and list your business for sale through us.
This first step in the DBG Advisors Proven Process helps business owners get a clear picture of what lies ahead. Our prospective clients can count the cost of moving forward before they list their company for sale. If they decide they are ready to move forward, then we will enter into a Listing Agreement to sell their company. However, if they decide that they need to postpone their exit to properly prepare, then DBG Advisors can be engaged as their Business Growth Coach to help them prepare for their eventual sale (this process is explained in the Business Growth Coaching tab on this website).
Huddle With Trusted Advisor
Once a decision has been made to move forward with the sale of their company, DBG Advisors encourages our clients to pull together their trusted advisors to establish a clear game plan for the sale of their company. These trusted advisors usually include the following: accountant, financial advisors and/or estate planning attorney, transaction attorney and DBG Advisors. We also encourage our clients to involve any family members who are decision makers in the company. Obviously, these advisors need to hold this information in strictest confidence.
The desired outcome of this gathering of advisors is to promote clear communication or the desired outcome of the exit plan. There are many moving parts to selling a company, so everyone needs to be on the same page with a complete understanding of the game plan to be used.
Confidential Promotion Package
After establishing a game plan, the next step is to put together a confidential promotional package to be used to promote the sale of the company. DBG Advisors works closely with our clients to gather all the information necessary to develop two marketing pieces call a “Teaser” and a “Confidentiality Information Memorandum” (“CIM”).
The Teaser is a one-page document that presents the opportunity without revealing who are where the company is. The Teaser is sent to a wide network of accountants, attorneys, financial advisors, known buyers and private equity groups who in turn are encouraged to send it on to others who may have an interest in this opportunity.
The Confidential Information Memorandum (“CIM”) is forwarded only to those who indicate interest and sign Confidentiality Agreements. The CIM provides much more detailed information because confidentiality is required, and these individuals and groups have been vetted to assure their ability to move forward with a purchase. CIMs include an executive summary, industrial overview, business overview, financial information, and a description of the investment opportunity. This is basically everything a buyer would need to make a buying decision.
Once these documents are developed and approved by our clients, DBG Advisors can launch the promotion of your business for sale. The time frame needed to put these documents together may very depending on how quickly the information can be made available, but we are committed to moving as quickly as possible to put this package together.
Engage Qualified Buyers
DBG Advisors makes it a priority to meet with our clients to determine who they think would have an interest in buying their company as well as who they do not want to sell their company to, at any price. We make sure no stone is unturned when it comes to who a qualified buyer might be. We use our best efforts to vet these prospective buyers so that we do not waste our client’s time.
Even before the NDA is signed, we go to work to make sure the prospective buyer is legitimately qualified to buy your company. After this vetting process is complete, we begin the process of making sure the qualified buyer’s questions are answered in a timely fashion. The correspondence goes through us sot that our clients are not placed in a compromising situation by not knowing the boundaries that need to be maintained between the buyer and the seller. Experienced buyers can take advantage of inexperienced sellers and ask questions that are not appropriate in the initial stages of discussion.
As the process moves forward, DBG Advisors receives the qualified buyer’s Letter of Intent (“LOI”) and works with the business owner and other trusted advisors, specifically the transaction attorney, to wisely respond to the buyer’s intentions. This may go back and forth between the attorneys before an acceptable LOI can be executed. With the execution of an LOI the buyer is usually required to place 1% of the purchase price in escrow to take the company off the market.
Manage Due Diligence
DBG Advisors serves as the funnel through which the buyer and seller exchange information during the due diligence period. The reason for this is to protect the seller from sharing too much or the wrong information that is being requested. In many cases this a period of negotiation because in many ways the sharing of information needs to be negotiated point by point. The due diligence period needs to be managed well to keep the transaction moving because the old saying, “Time kills deals,” is true. Dragging things out can considerably jeopardize the possibility of moving things toward a successful closing.
On the other side of the equation, effective management of the due diligence period provides considerable assurance to the buyer. A slow roll out of information to the buyer from the seller can produce suspicion in the minds of buyers. Timely production of information assures a successful transaction.
Negotiate Definitive Agreement
Typically, while the due diligence process is in process the attorneys for the buyer and seller will be engaged in drafting the Definitive Agreement that will be used in the transaction. This process is a back and forth exchange of documents that outline the structure, consulting agreements, non-compete agreements, representations and warranties and other deal points.
During this time, all the trusted advisors are consulted to make sure the game plan is being implemented in an appropriate way. It is important to for the accountant to make sure the Net Working Capital calculation is being formulated correctly. The financial advisor should be engaged in making sure the proceeds of the transaction will be properly categorized to limit the tax liability of the seller. The attorneys should be focused on making sure that the documentation is done in a way that protects their client. DBG Advisors’ role is to make sure that buyer and seller and their respective advisors are communicating effectively and that everyone is moving forward without unnecessary delays.
Ultimately, the focus of this portion of the transaction timeline is to make sure the terms of the Definitive Agreement are in alignment with the original intent of our client. Our goal is to make sure our clients get the full value of their life’s work.
Receive The Funds!
The closing table is the “finish line” that everyone is looking to cross. When we sit down to sign the Definitive Agreements and all the other documents required to close the sale of your company, we should have the full confidence that everything that could be done has been done to your full satisfaction.
When the wire transfers have been received it is time to celebrate and to begin the process of moving on to your next adventure. That could be a month-long vacation on the beach, or it could be stepping into another business that you planned to start once you sold your company. No matter what your plans are DBG Advisors will be celebrating with you and making sure that your best interest is served even after the transaction has closed.
Receive a Complimentary Book, Written by Nolan Duck
In this groundbreaking book, you’ll discover:
- The shift in mindset required to prepare your business for sale
- Issues that may be driving down the value of your company
- Why 80% to 90% of business owners who think they’re ready to sell… aren’t
- The imperative for establishing a management team prior to sale
- Little-known secrets in determining the valuation of a company