Part 3 of the selling your business series outlines crucial preparations for a sale, including financing options like buyer down payments, seller financing, and loans. It emphasizes the importance of accurate financial records, asset quality, and a strong management team, alongside addressing legal and operational considerations. The document prepares business owners for the transaction process by highlighting how to maximize sale outcomes and reduce potential risks.

1. SELLING YOUR
BUSINESS:
Part 3: Preparing for a Sale
Presentation Series by Schwartz
Heslin Group, INC. (SHG)

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. Once you have an idea about the
value of your business, begin
planning for the transaction…

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. 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. 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. Non-Compete Agreements
 Usually 3 to 5 years
 Covers a defined territory
 Amortization to Buyer

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. 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. 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 Jettison unnecessary, outdated, and non-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 Reduce outdated inventory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. 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. 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. 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. 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

15. Now that your preparations are
complete and you have
streamlined operations, we can
address the actual transaction

16. Next in the SYB Series:
Part 4: The Transaction