shg: selling your business, part 3
TRANSCRIPT
SELLING YOUR BUSINESS:
Part 3: Preparing for a Sale
Presentation Series by Schwartz Heslin Group, INC. (SHG)
The SYB Series Part 1: Introduction and First Steps Part 2: What is Your Company Worth Part 3: Preparing for a Sale Part 4: Your Role in the Transaction
Once you have an idea about the value of your business, begin planning for the transaction…
Financing 4 primary methods:
Buyer down payment Seller financing
No seller financing can result in significant sale price discount
Loan – SBA or conventional Earn-out
Will debt be used to finance transaction?
Earn-outs Type of seller financing Payment for revenue stream over a
period of time Reduces buyer risk Seller pays income taxes over time Details of agreement crucial to who
benefits
Employment Agreements Guaranteed job under new owner Ask for written job description Questions to ask yourself:
What resources are available to you? Who do you report to? Level of autonomy What if it doesn’t work out? What circumstances could result in your
termination
Non-Compete Agreements Usually 3 to 5 years Covers a defined territory Amortization to Buyer
Taxes Impact of a sale on taxes WILL be
complex Asset sale or stock sale? What is the type of business entity? How will purchase price be allocated?
Seller seeks to maximize after tax proceeds from the sale
Buyer seeks to minimize consideration paid relative to after tax cash future cash flow
Financials Maximize profits, even if at the expense
of lifestyle Report all income, deemphasize tax
planning Ensure the accuracy and easy
accessibility of records Consider having your financial
statements audited Better and improving financial metrics
will fetch a better sale price
Assets Jettison unnecessary, outdated, and non-
operating assets Will improve the quality of your asset base
and increase ROA Reduce outdated inventory Update operating assets
Especially technology and software
Marketing and Networking Formulate and implement an aggressive
marketing plan: Reduce customer and supplier
concentration Build your network
Industry groups Competitors Consultants in the industry Related businesses Sources of financing
Management and Workforce Develop strong, independent
management team Buyers often holdover existing managers Consider contracts and/or retention
bonuses Preferably usher family members out of
business Replace unproductive or redundant
employees
Miscellaneous Address:
Environmental issues Regulatory issues Outstanding lawsuits Outstanding warranties
Get minority owners on board If not, be prepared to afford them certain
rights under the applicable laws in your jurisdiction
Update and Streamline Operations Update and back-up all databases Maintain accurate information on
revenues by line of business and by customer
Trademark and copyright all logos, brands, and systems
Now that your preparations are complete and you have streamlined operations, we can address the actual transaction
