SELLING A BUSINESS
Selling a business involves 4 basic steps:
- Evaluating the Business and setting the Sale Price
- Marketing the Business and Finding qualified buyers
- Negotiating the sale
- Closing the transaction
1. Evaluating the Business and Setting the Sale Price
At Yearwood & Co. we insist that an independent appraisal report be completed before we will list the business for sale. Selling a business is many times more complex than a simple house sale and the key to having a viable, reliable valuation performed on a business is to have it performed by an independent third-party valuation service.
Without an independent third-party appraisal, an owner should expect to face heavy negotiations because it will be the owner's opinion of value versus the buyer's opinion and they are very likely to be a long way apart.
Be very suspicious of any business broker or realtor who relies upon his own in-house valuation report to set the sale price. A buyer will place no credibility in such an opinion because the maker of the appraisal has a vested interest in obtaining a higher price than can be justified because it will increase his commission. A buyer will place no credibility in a value arrived at by the business owner's accountant or lawyer for the same reason.
There is a big difference in the quality of valuation reports that can be performed. Some brokers rely on valuation software that is based on unproven theories. Yearwood & Co. use the services of the best known and largest, independent third-party valuation services in Canada to perform these reports for our clients because we are trying to obtain full market value for their businesses.
Professional business evaluators know what price other businesses, like yours, are really selling for. Their reports are reader friendly and can be shown to prospective buyers. They go much farther than other reports because they recommend which assets to sell and which to keep. The same is true for the liabilities of the business.
Professional business evaluators recommend the deal structure that will be most likely to produce a completed transaction and at the best obtainable price. They do not stop there. They totally justify that the price recommended is the best obtainable for the business owner and the report proves the asking price is realistic to a prospective buyer. This is often useful when buyers go to seek financing for the purchase.
Business brokers report that they have consistently produced higher prices and smoother sales when one of these reports is presented as part of the business offering package or is available to be presented to a buyer to confirm value.
2. Marketing the Business for Sale
We market businesses for sale in a variety of ways because we have found that the more tools we employ to get this job done, the easier it is. We advertise businesses for sale in the newspapers and magazines, including those that cater to the local ethnic populations. Through our presence in multiple local phone directories we regularly generate contact with many potential buyers.
We also do direct mailings to our network of bankers, accountants and investment counselors, many of whom have clients that are looking to expand their existing businesses or invest in new businesses.
With our website and our internet advertising we have access to thousands of individual and corporate buyers on a worldwide basis.
Most of the buyers we work with are first time buyers, many of whom are leaving the corporate environment to own their own businesses and control their own destinies and their earnings. We insist upon educating this type of buyer so that they understand and have a realistic appreciation of what they can accomplish with the size of their investment.
3. Negotiating the sale
At Yearwood and Co. we are skilled negotiators. As lawyers with extensive experience we understand the issues involved, the stumbling blocks that can be encountered (and how to get around them) and we know how to get the best deals for our clients. We understand that information is power and we know how to maximize leverage, control the negotiating agenda and design the most effective negotiating strategies.
4. Closing the transaction