Starting and building a business has long been considered one of the most legitimate and time tested ways to create wealth. It’s never easy starting and running a successful business but the personal and financial rewards can be considerable. Ask any entrepreneur in Arizona and beyond and im sure they will have plenty of interesting stories to share about the trials and tribulations of being a small business owner.
One of the main goals naturally of owning your own business is to build equity and to sell it someday to make a return on your investment and hard work. So naturally as a professional Business Broker in the Phoenix I am often asked how to sell or what is the process of selling a small business in Arizona or any state for that matter.
The General Process:
Here are the basic steps that I share with my clients about how the process of successfully preparing and selling a business generally works.
- Initial phone call: Generally this first confidential call is when I ask the Seller to share some basic info about their business including its business category or niche, how long its been established, reason for sale, and its approximate annual sales. If the client wants to get a ballpark figure about what their business might be worth I can also share that with them if they can provide some additional financial info such as what are they pulling out of the business approximately as the owner operator. Regardless, all Info provided to me is always held strictly confidential.
- Initial Meeting: The next step in the process is to hold a confidential meeting at my office to learn more about the clients business and also to review some initial financial statements. This is also the time I will share with the client about how to adjust the financial statements to determine the true earning power of the business. This figure is often used to help price the business for sale by using industry “rules of thumb” or multiples of the net cash flow. I can also access “sold” business comparables to also help determine an asking price.
- Listing Meeting: The second meeting we generally have is designed to agree on the final asking price and the terms of the sale. This is also when we sign a listing agreement and when I begin preparing the listing package and confidential marketing materials such as the comprehensive business summary profile. If I haven’t already, I will also ask the client if I can visit the place of business to see the operations firsthand and also take images to use on the profile If appropriate.
- Going Live: The next step in the process after the Seller has reviewed and approved the confidential marketing materials I have prepared is to go “Live” with the listing. I utilize a number of different traditional and online marketing channels which I have had great success with in finding qualified buyers for my clients businesses. All the Ads I post are “Blind” so the confidentiality of the listing is protected. All buyer prospective buyers are also screened and required to sign a non-disclosure statement before they receive any pertinent details about the business.
- Buyer Meeting: When a qualified buyer emerges that wants to learn more about the business the next step is to arrange a confidential meeting either at my office or the business during off hours. This is a chance for the Buyer to learn more about the business and for the Seller to get comfortable with the potential new owner.
- Offer To Purchase: After the Buyer/Seller meetings are completed generally if the buyer has a high level of interest an offer or purchase contact will be presented with an earnest money deposit, contingencies, and tentative closing date. In most cases the Seller will be given a few days to review the offer and have the opportunity to accept it or respond with a counter offer.
- Open Escrow & Due Diligence: If an offer is accepted the next step would to open escrow with the deposit and let the Buyer begin his detailed examination of the business including its books and records. In general most due diligence periods last for approximately 30 days.
- Closing: After the buyer has successfully completed his due diligence the next step is to move forward with the formal transfer of ownership at the escrow office with the signing of closing docs. And of course this is when you the seller will receive thier financial reward for all your hard work and time invested!
- Buyer Training: Generally the Seller should be prepared to provide up to 30 days of a free training after the sale to the new owner to ensure the transfer goes smoothly.
More Info: Please feel free to contact me at anytime (602-292-0553) if you have questions about valuing or possibly selling an established business in the Phoenix AZ metro area. Please keep in mind that om average it take 3 to 6 month months to find a qualified buyer. Sometimes longer…