What is the single most important type of information I need for prospective buyers?
Every serious buyer will want to see a set of financial accounts up to the end of the most recent financial year to which your business normally makes up accounts. The buyer will expect these accounts to have been produced by and possibly audited by a firm of external accountants.
In practice serious buyers will want to see financial accounts for the last three financial years plus management accounts / sales figures / profit figures from the end of the last financial year up to the current date.
How long will it take to sell my business?
As a rough guide it will take:
- 3 – 6 months to sell a micro company
- 6 – 9 months to sell a small or medium size company
- More than 9 months to sell a large company
The shortest period in which we have sold a business in recent times is 3.5 months. That was the sale of a micro company, operating in a desirable sector, which was wanted by quite a few larger companies. The company that bought our client’s business had ready-made legal agreements, as they had recently completed the purchase of another company, so the preparation of legal documents was much faster than normal.
How much is my business worth?
The market value of a business is what a willing buyer is prepared to pay and a willing seller is prepared to accept. This of course can only be clarified when a business is taken to the market. Until this happens, valuations of a business are a matter of opinion.
However, it is possible to estimate the likely value of a business, by taking account of and understanding a number of factors relating to the profitability of the business and the value of its net assets.
Focus Business Sales and Acquisitions (FBSA) uses a number of different business valuation techniques appropriate to the size and trading sector of the business, in order to arrive at an accurate valuation. Quite apart from our skills, the principal factor in valuing a business is our experience and judgement. We will involve you at all times in the process of valuing your business and seek out areas where operational changes or savings will improve the value and marketability of your business.
This is a partnership focused on achieving the best possible price for your business.
How can you guarantee that information about the sale will be kept confidential?
In broad terms we do not reveal the name of your business to prospective buyers until you authorise us to do so. In particular prospective buyers must sign a Confidentiality Agreement before information is released to them.
When we are contacting prospective buyers we only give general information about the business and its location, so that it cannot be easily identified. When we get an enquiry we collect information about the prospect from various sources, including you, before we speak to the prospect.
During our initial talk with prospects we will question them about their background, the reasons for their interest and if appropriate whether or not they can raise the funds required. We explain the process for release of information – the prospect must complete and sign a Confidentiality Agreement restraining the prospect from revealing information about your business for five years, before we release information about your business.
After that initial conversation we report back to you. If you are happy to release the Information Memorandum we send the Confidentiality Agreement to the prospect for completion. When we receive the completed and signed Confidentiality Agreement we forward the Information Memorandum to the prospect.
How much are your services going to cost me?
This is the most important sale of your business career and we need to work closely with you to ensure you receive the best possible price for your business.
A lot of preparatory work is required prior to bringing a business to market, including the collection of detailed information about the business, the valuation of the business and preparation of the Information Memorandum etc. We charge a retention fee to cover the costs of this work.
Our fees will depend on the size of the business and the particular mix of services you want us to provide. We are happy to discuss our services and our fees with you at our introductory meeting.
Our principal fee is only payable on the successful completion of the sale and is based on a percentage of the selling price – less the retention fee already paid. In addition to the brokerage fees you may also incur costs for advertising and other promotional activity, depending on the methods you want us to use to prospect for buyers.
Why should I use a business broker?
There are many reasons why you will benefit from using a Business Broker to help you sell your business. Here are some of those reasons:
1) Improved saleability. By opting for a Presale Audit and Business Grooming the business will be better prepared for sale. Business Grooming normally improves the efficiency and profitability of the business as well.
2) Confidentiality. You reduce the possibility of alienating your customers, your suppliers, your employees and other important stakeholders.
3) Using a Business Broker allows you to focus on running the business. It is very important that the business continues to run profitably prior to sale.
4) Buyers will find it easier to talk to an intermediary in the early stages. This promotes a healthier, less contentious, relationship between the buyer and seller – particularly important if they have to work with each other post-acquisition.
5) Vetting tyre kickers. A Business Broker will vet all enquiries and eliminate the tyre kickers. Without that screening you will waste lots of time which should be spent running your business.
6) Brokers will have a supply of potential buyers who will already have indicated an interest in a business such as yours.
7) Business Brokers are geared up to directly contact large numbers of target buyers by letter, email and phone.
8) A Business Broker will provide an expert valuation for your business.
9) Documentation – a Business Broker will handle all the paperwork, working with your lawyers and accountants to produce the large number of financial and legal documents required.
10) Due Diligence can be very stressful and very time consuming. A Business Broker will deal with Due Diligence issues in a timely and expert fashion, saving you huge amounts of time and easing the stress.
Most important of all a Business Broker will help you to negotiate and close the deal
Should I tell my accountant and solicitor?
It is important that you make your accountant aware of your decision to sell. From the time you decide to go to market it is vital that up to-date and accurate financial information is available for the preparation of the Information Memorandum and other forecasts. You may prepare robust internal management accounts, however a potential buyer needs to be sure that the figures, on which his/her offer price is based, remain accurate.
Delays in producing financial information or errors in the figures will inhibit the momentum of the deal and can prove fatal to the deal. Often accountants will find it difficult to deal with requests for help at times outside your normal reporting dates, so the sooner they are made aware of your possible needs the better. It is important that any outstanding tax issues are resolved by your accountant at an early date.
Likewise with your solicitor, if there are any legal issues or disputes outstanding, the sooner theses are resolved the better. Maintaining the momentum in completing a deal is vital and reflects well on the organisation and efficiency of the owner.
The longer it takes to resolve outstanding financial, tax and legal issues the more likely the buyer will withdraw from the deal.
How are you going to market my business?
An excellent sales process is vital to achieving a successful outcome. Each business is different and therefore following an analysis of the business and prospects for the sector involved we will develop and agree a marketing strategy for the sale.
It is important at this stage that the likely buyers of the business are identified e.g. likely trade buyers. It is also important to identify the opportunities which the acquisition of your business would bring to the businesses of potential buyers.
Working within the confidentiality limits specified by you, the business will be marketed on our website and those of our international partners. We will prospect for buyers by way of emails, letters, advertisements and direct calls where appropriate. Our data base of potential buyers will be targeted.
The success of the marketing effort is kept under continuous review with you and changes made if appropriate.
Why would I use your firm to sell my business rather than use an estate agent?
Focus Business Sales and Acquisitions (FBSA) is a firm of Business Brokers with expertise and experience of selling businesses. In cases where property is being sold along with a business we will use the services of an estate agent to help us during the sale process. This is because an estate agent has more knowledge and expertise in the property market than we have.
Business Brokers are not better than estate agents nor vice versa – each group of professionals provides a different range of services. These are some of the services that FBSA provides which are not normally provided by estate agents:
- Valuation of the business (as distinct from valuing the property owned by the business)
- Producing the Information Memorandum
- Development of future profit scenarios based on the synergies between your business and the businesses of specific prospects
- In the case of larger companies producing a PowerPoint presentation for delivery to the Boards of major prospect companies
- Management of the Data Room
- Assistance with Due Diligence
- Advice on the “Heads of Agreement”
- Advice on “Sale and Purchase Agreements”
- Assistance and advice during “Completion”