SHG: Selling Your Business, Part 3


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Part 3 of SHG's Selling Your Business presentation series walks you through the necessary preparations for a sale.

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SHG: Selling Your Business, Part 3

  1. 1. SELLING YOURBUSINESS:Part 3: Preparing for a Sale Presentation Series by Schwartz Heslin Group, INC. (SHG)
  2. 2. 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
  3. 3. Once you have an idea about thevalue of your business, beginplanning for the transaction…
  4. 4. 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?
  5. 5. 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
  6. 6. 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
  7. 7. Non-Compete Agreements Usually 3 to 5 years Covers a defined territory Amortization to Buyer
  8. 8. 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
  9. 9. 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
  10. 10. Assets Jettison unnecessary, outdated, and non- operating assets  Willimprove the quality of your asset base and increase ROA Reduce outdated inventory Update operating assets  Especially technology and software
  11. 11. Marketing and Networking Formulate and implement an aggressive marketing plan:  Reduce customer and supplier concentration Build your network  Industrygroups  Competitors  Consultants in the industry  Related businesses  Sources of financing
  12. 12. Management and Workforce Develop strong, independent management team  Buyersoften holdover existing managers  Consider contracts and/or retention bonuses Preferably usher family members out of business Replace unproductive or redundant employees
  13. 13. 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
  14. 14. Update and StreamlineOperations 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
  15. 15. Now that your preparations arecomplete and you havestreamlined operations, we canaddress the actual transaction
  16. 16. Next in the SYB Series:Part 4: The Transaction