Selling a company is both complex and time consuming. Trying to navigate the intricate process on your own, while maintaining day-to-day business operations will almost certainly lead to costly mistakes. Colorado Business Exchange provides dedicated, professional attention to the sale of your business while you continue building its value to collect the maximum price. Although every business sale is unique with its own set of circumstances, we follow a specific process that’s proven to protect sensitive information, keep the sale in motion, and secure the best outcome for you.
The Business Selling Process
The Colorado Business Exchange process begins with a commitment to confidentiality. Broadcasting that a business is for sale can cause alarm among employees, customers and creditors, with their subsequent reactions potentially destroying its value. Therefore, all of our lead generating activities utilize a “Blind Profile” that even your employees or closest competitors would not recognize as your company. Only well qualified prospects who pledge to protect confidentiality are given identifying details about your company. Moving forward, we release details about your company and its value drivers only as appropriate and necessary for a buyer to determine if the business is a good fit. Confidentiality is especially important when considering a sale to a competitor or industry insider.
After years of personal sacrifice, it’s not uncommon for business owners to have a very subjective view of what their business is worth. Our first step with business owners is to provide an estimate of Fair Market Value that’s based on today’s business-for-sale marketplace of sold comparables, current listings, cyclical trends, statistical probabilities, financing, and the attributes that buyers want most. We also provide an estimate of net proceeds from a sale because the final amount your get – after paying debt, taxes and fees – is much more important than Fair Market Value. This assessment is crucial to determining an appropriate asking price and provides the foundation for successful negotiations.
Along with making sure you and your company are well prepared for the selling process, Colorado Business Exchange initially prepares two documents for prospective buyers. The first is a “Blind Profile”, providing a brief and confidential description of the business along with basic financial information, which is publicized to entice prospects to inquire about your business. The next is a more comprehensive presentation of your business – from financial statements, equipment and real estate to management, marketing and value drivers. This “Confidential Offering Memorandum” is only provided to fully-qualified prospects to help them determine if the business is a good fit for them.
Business owners often think selling a business is like selling real estate. The broker puts it on the MLS and prospects show up ready to buy. Unfortunately, it’s not that simple. While there are lots of so-called buyers in the marketplace, most have unrealistic expectations, or are simply not qualified. When you narrow the market offering to one specific company with its unique characteristics, there may be just a handful of buyers left. To make sure we reach as many qualified prospects as possible, Colorado Business Exchange utilizes multiple methods to market your business, starting with placing the Blind Profile in appropriate mass media and online advertising. In addition, we review buyer databases, contact appropriate prospects, and target a wide range of individual, strategic, industry and private equity buyers nationally. Finally, we network with business intermediaries locally and from around the country offering them significant cooperative fees. All of which is done without compromising your identity.
Qualification of Buyers
Colorado Business Exchange works with buyer prospects to assess their motivations, professional abilities and financial capabilities. If the prospect has an appropriate resume, genuine interest, sufficient means, and accepts the terms of our Confidentiality Agreement, they will receive the Confidential Offering Memorandum. With this, we are able to help them determine if your business is a good fit for them. Can the prospect envision their success in your company? Is your business going to meet their needs, and are they serious about buying it? When we determine there is a fit, and expect the prospect will ultimately make a reasonable offer, then – and only then – will we arrange a meeting with you.
The main purpose of the initial meeting is for the prospective buyer to “see” the business and hear about it directly from the owner. Often times this meeting is held after hours at the business location, so the buyer can get a firsthand look at the equipment and operations. The prospect usually wants to confirm and clarify their understanding of the business directly with the owner. Both the owner and prospective buyer typically ask each other questions concerning background, expectations, motivations, goals, and more. At this meeting, it is very important for both parties to start developing the trust and rapport that will be needed to achieve a successful transition. Typically, this meeting solidifies the buyer’s intent to make an offer, and leads to formal negotiations.
Upon deciding that your business is right for them, we help prospects write a Letter of Intent to purchase (LOI). The LOI details the price, terms, and other conditions of the buyer’s offer. Typically, this letter goes back and forth between buyer and seller as they negotiate an acceptable agreement. Colorado Business Exchange acts as a mediator to facilitate this process, and foster a mutual understanding between buyer and seller. With experience working on a multitude of business ownership transitions, we can spot potential problems and red flags – and offer solutions to potential deal killers. As transaction brokers, we do not advocate for either party, but assist each party in understanding the legitimate positions and concerns of the other. Of course, the ultimate goal is a mutually acceptable contract that leads to a smooth transfer of ownership and successful business transition.
Once the parties are in agreement on the terms of the LOI, it’s time for the parties to engage their respective attorneys who will negotiate the finer points of a comprehensive and legally binding purchase agreement. Colorado Business Exchange facilities the interaction between the attorneys, accountants, buyer and seller making sure the final contract accurately reflects the understanding of the parties.
The process a buyer goes through to verify that the business is actually performing as represented by the seller is called due-diligence. This can be a very invasive process and typically lasts several weeks or even months. The buyer may audit the business records such as bank statements, ledgers, payroll and tax records, leases, equipment maintenance records, etc. Basically, the due-diligence process is the buyer investigating and confirming that the business is as they expect, and that it will continue to be successful after the transition. This is also the time for the seller to confirm that the buyer has the wherewithal to not only purchase the business, but to successfully run it. Colorado Business Exchange works with both parties to facilitate the due-diligence process. If due-diligence is successful, the sale moves forward. If not, it’s terminated.
Obtaining a conventional or SBA loan for the purchase of a business is a complex and onerous endeavor. Colorado Business Exchange maintains strong relationships with several local and national lenders to help navigate the process. We also help business owners and buyers determine if seller financing is a viable option. Whether the buyer obtains financing from the seller, a third party, or a combination of both, Colorado Business Exchange facilitates the flow of financial information and keeps closing on course.
Colorado Business Exchange is responsible for ensuring a seamless closing. We coordinate with the parties’ attorneys to prepare all the necessary searches, releases, filings, reports, escrows, and prorations right up to the formal execution of all closing documents to complete the transaction. The buyer brings certified funds to be distributed according to the settlement statement and the title to the business changes hands. Closing marks the end of the transfer and the beginning of the agreed-upon transition. Congratulations are in order!