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Selling a Business
You've decided to sell your Los Angeles business.
There are some things you should know about how your business
broker in Los Angeles gets it done.
John Schmid and Summit Business Brokers want
you to go into the process of selling your business with eyes
wide open. Here’s a quick checklist
of the sales process as performed by a good business broker
in Los Angeles:
Step 1: Valuing Your Business -
After you and your business broker in Los Angeles
sign a Confidentiality Agreement, you provide
the broker with three years of financial statements, tax returns
and a year-to-date operating statement. You may also
be asked for such information as a lease summary, a list of
significant assets, and a description of key employees.
From this information, the business broker comes up with
a Most Probable Selling Price (“MPSP”) - the range
your Los Angeles business will likely sell for in today’s
market. If the MPSP meets your financial goals, you proceed.
If not, then you can stop the process here, or wait until
the company’s profitability improves, or market conditions
change.
Step 2: The Representation Agreement -
If the MPSP range is acceptable, a Representation Agreement
is signed, naming the business broker as the exclusive
marketing agent for your Los Angeles business, and stating
the offering price and terms. The Agreement
also stipulates the commission to be paid upon successful
closing.
Step 3: Developing & Approving a Marketing
Plan – In putting together
a marketing strategy, your business broker employs such time-honored,
effective marketing tools as online advertising on key websites,
letters and calls to known Los Angeles buyers, and selective
mailing and phone calls to potential buyers. Once you okay
the plan, your business broker in Los Angeles can really go
to work on your behalf.
Step 4: Finding the Right Buyer.
A good business broker finds Los Angeles buyers in three ways:
Known buyers who have already signed Confidentiality
Agreements and have expressed a desire to buy a business;
Internet Buyers who respond to listings posted online;
and Strategic Buyers who are approached discretely,
with the seller’s permission.
(Note: Confidentiality is paramount at all times.
The name of your business, its location and key facts that
might allow it to be identified are always excluded from marketing
materials, in order to keep everything confidential until
closing. Significant value can be destroyed if it is commonly
known that the business is on the market. Confidentiality
Agreements signed by potential buyers are required before
a good business broker in Los Angeles discloses any information
about the seller. Everything possible is done to prevent employees,
customers, suppliers, competitors and landlords from becoming
aware the business is for sale.)
Step 5: Presenting Offers to the Seller:
All offers submitted to the seller are in writing and contain
the price, terms and conditions, and proof of funds to close
the transaction. The seller may accept, reject or counter
the offer. The business broker’s role is to ensure
that all communications between the Los Angeles buyer and
seller are clear and understood.
Step 6: Due Diligence Period:
Once the seller accepts an offer, the buyer has a short period
to examine the company’s financial records and other
relevant information. If all goes as planned, the buyer signs
a statement removing all conditions (with the possible exception
of their party financing), and the transaction proceeds towards
closing. Also, during the Due Diligence Period, the
seller has the opportunity to verify the buyer’s creditworthiness
and business experience.
Step 7: Closing and Beyond. When a
buyer has been found, the business broker in Los Angeles negotiates
the best price and terms, then guides the transaction through
closing, a complex process which may involve escrow, bank
and seller financing documentation, dealings with attorneys
for each side, business transaction issues, final valuation
of inventory and accounts receivable.
John Schmid knows the business broker process in
Los Angeles inside and out. With his vast expertise, deep
resources and caring personal service, you can feel confident
that the sale of your business is in the most capable hands.
A memo to Sellers
When it comes to successfully selling your business,
planning ahead is vital. Here are some things to think about
in the time before you employ a business broker to
list your Los Angeles business:
- Make Your Business as Profitable as Possible
– Sounds obvious, but no matter how or why you run
your company, or why you are planning to sell, you have
to make a potential buyer feel that that your business will
make money when they’re in control.
- Keep Good Books – Initially, a
business broker in Los Angeles can best present your business
with clear, accurate financial statements. Staying on top
of your accounting makes your business more attractive.
- Record All Cash Transactions –
Once again, accurate records increase business value. So
taking cash out of a business without keeping records, even
if it might lessen your tax burden, will also lessen the
value of your business when it’s time to sell.
- Don’t Make Yourself Indispensable –
Any business broker in Los Angeles will tell you that potential
buyers are skeptical of companies whose CEO is also the
CFO, chief salesman, chief accountant, chief bottle washer…you
get the idea. Cultivate a secondary level of excellent employees
who can continue to run the company and make it grow, so
the company doesn’t lose its value when it loses its
founder.
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