The ultimate guide to selling your business

The Ultimate Guide to Selling Your
Business on Your Own
The Seven steps to selling your business
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888-693-7834 | www.morganandwestfield.com | jacob@morganandwestfield.com

Table of Contents
The Seven Steps to Selling your Business

1. Prepare your business for sale
 Prepare your financial statements
 Set a realistic asking price
 Pricing a business that is losing money
 Consider financing a portion of the sale
 Prepare key documents for the sale

2. Advertise your business for sale
 Options to advertise your business for sale
 Writing an ad copy that sells
 An example of an actual ad copy

3. Pre-Screening Buyers
 Our research about buyers
 How buyers respond
 Responding to Buyer Inquiries
 What is an NDA or Confidentiality Agreement?
 The secret to quickly pre-screening buyers
 What to do after you receive the buyer’s NDA
 The secret to selling your business efficiently

4. Showing your business to buyers
 Wait for questions
 Set a meeting
 The showing
 Disclosing the right amount of information
 The purpose of Due Diligence
 Which documents to disclose before an offer is made

5. Negotiate an Offer
 Talk terms
 The different types of offers
 Further qualifying the buyer
 Keeping your focus

6. Due Diligence
 What is due diligence?
 How long is due diligence?
 What is the purpose of due diligence?
 Preparing your business for due diligence

7. The Closing
 Get help
 Closing documents

Introduction

Hello and congratulations on the decision to sell your business. While selling your business can be
a complicated process, it doesnt have to be frustrating. There are many steps to successfully selling
your business and if you handle each one effectively then the entire sale can be a successs.

We dont believe it is necessary to hire a broker and pay them 8-12% commission. If you have a
little time, the right resources, the right tools, and the right attitude; you can sell your
business on your own.

Having been business owners ourselves, we believe in helping business owners and providing them
with the right resources and direction. We are only here if you need our help, and only for what
you need help with. No need to commit to a long term contract and pay high fees for something
that you can handle on your own with the right tools.

Your business is likely one of your most valuable assets. It makes common sense to invest a little
time in learning how to handle in properly. Unfortunately, many business owners incorrectly
believe that they can give the entire process over to a broker and have them handle everything.
This isnt true. You will have to play a huge part in the process, whether someone is handling it for
you or if you are managing the process on your own.

This short guide will help you with the major steps in selling your business. We will share with you
the secrets we have learned from helping hundreds of people sell their businesses. Read this guide
and follow the advice and you will surely save countless time and thousands of dollars in the
process.

About Us
Licensed in Nevada, Ohio and California; we have specialized exclusively in selling businesses for
over ten years. Approximately one year ago we created this For Sale by Owner Program where we
help business owners sell their business on their own without having to hire a broker. We require
no contracts and you can cancel at anytime. We are a small company and believe in prompt,
personal service.
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Step #1 – Prepare Your Business for Sale

Prepare your financial statements

Nearly every buyer will ask to see your financial statements at some point during the process of
looking at your business. This typically happens fairly early in the process.

How do your financial statements look? Are they straightforward, accurate, and easy to
understand? If you are like most business owners, then you have probably not prepared your
financial statements with the goal in mind to sell your business.

Many business owners financial statements are often inaccurate, are full of contradictions, are
incomplete, are sometimes completely unavailable, and most importantly are not designed to help
you sell your business. Most financial statements we see do not show the “real” profit of the
business but rather include unreported income or inflated expenses; all which lower the value of
the business?

What can you do about it?

The first step in preparing your business for sale is to “normalize” your financial statements. This
involves making adjustments to your financial statements as if you had originally prepared your
financial statements to sell your business. This process is called “normalizing” the financial
statements.

Most business owners unnecessarily deduct excessive expenses when operating their business.
Unfortuately, these expenses lower your net income on your financial statements and thus lower
the value of your business. Many of these expenses are personal in nature or are unnecessary.
“Normalizing” your financial statements involves removing these expenses (these are the
“adjustments”), which ultimately increases the value of your business.

Many business owners also do not report all of their income. This type of adjustment should NOT
be made in writing. There are strategies for dealing with unreported income – this will be discussed
in much depth later on in this guide.

What do we mean by “financial statments”?

When we say “financial statements” we are referring to your “Income Statements” or your “Profit
and Loss Statements”. This document shows the Income and Expenses from your business and also
shows the “Net Profit.

The process involves the following steps:

1. Retype your financials statements into Excel - we recommend 3 years
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2. Your Excel spreadsheet should have 3 columns: original, adjustments, and adjusted.
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3. Make the necessary adjustments to your financial statements


4. Click here for an example and complete description

Sample adjustments you can make to your financial statments include the following:

1. Depreciation – This is a non cash expense and should be removed
2. Interest – If the buyer is NOT assuming your debt or loans then this expense should be
removed
3. Owner’s Salary – If you are drawing a salary from the business then this expense should be
removed. This is ultimately going into your pocket anyway, so this should be added back.
4. Amortization – Amoritaztion is similar to depreciation, however is for intangible assets.
5. Taxes – Income taxes should be added back if they appear on your financial statements
6. Non-Reccuring or One-Time Expenses – This might include an investment in new
equipment, development of a new website, unnecessary attorney fees, or any other unusual
or one-time expenses.

The end result is an Excel spreadsheet that shows the original financial statements along with the
adjustments and the adjusted figures. Instead of “net profit” you will now have a figured called
“adjusted net” or “discretionary earnings”.

To view the complete process click the link below:

http://www.morganandwestfield.com/normalizing-financial-statements/

Set a realistic Asking Price

The first step in pricing or valuing your business is to “normalize” your financial statements or
prepare them so that you can value your business. After you have done this you can now begin the
process of valuing your business.

How do I price my business?

Pricing a business is primarily based on how profitable the business is. This is the number
one things that buyers are looking for and therefore the basis for how buyers value a
business when making an offer.

There are other variables that buyers consider when buying a business, however nearly
90% of them are looking for one thing – “profit” (or “adjusted net” or “discretionary
earnings”). What would you look for if you were buying a business? Wouldn’t you look for
a business that is making the highest profit or adjusted net possible?

But how do you define “profit”?

“Profit” is really what you put in your pocket and should be the figure that you came up
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with using the process above.
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Other terms for “profit” include the following:


1. “Seller’s Discretionary Earnings” (SDE for short) – This is the most common and is
used by nearly every broker and almost all buyers who have dealt with brokers.
2. “Seller’s Discretionary Cash Flow”
3. “Cash Flow”
4. “Adjusted Net Profit” or “Adjusted Net”

METHOD #1 – The Cash Flow Method

Step #1 – Figure out the cash flow (this is called “recasting” or “normalizing” the financial
statements) and this involves adding back to the profit the following items – depreciation,
amortization, owners salary, non cash expenses, non recurring expenses, and other perks.

Step #2 – Multiply the cash flow by the “multiple”. Here are common CURRENT multiples:

 Retail businesses – 1-2 times cash flow(restaurants, clothing stores, etc.)
 Service businesses - 1.5-2.0 times cash flow
 Manufacturing businesses 3.0+ times cash flow
 Wholesale businesses 1.5 – 2.5 times cash flow

Example - $100,000 (Discretionary Cash Flow)

x 2.0 (the Multiple)

$200,000 (Value of Business)

(Please note that these are current multiples. They were actually much higher before the
downturn. How do you determine the appropriate “multiple”? Unfortunately this can only
come from experience, however the guidelines above can be a useful starting point for you.
If you need assistance then please call us and we can give you some guidance.)

This first method is the most widely used and it is used for nearly every business
that is profitable. It is quite simple.

What should the price include?

It is simple – The price should include anything that is used or needed to create the “cash
flow” or “profit”. This includes ALL of the equipment that is considered “required to
operate the business” and that is used in the daily operations.
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What about inventory? This is a common debate among experts and you can safely try to
get paid for the inventory in addition to the price. It is going to be negotiated anyway so
ask for it up front and see what happens. We could write a 50 page article on this but we
won’t – we believe in keeping things simple.

METHOD #2 – COMPARABLE SALES

What about comparable sales? This is tough – They are NOT public record and are only
privately disclosed. The best place to get this information is from a broker that has accesses
to private databases. There are 3-4 databases with comparable business sales, however, the
information is very sparse and often quite inaccurate. Call us and we can tell you what the
multiples may be for your business.

Pricing a business that is losing money

So you have a restaurant that you invested $200k into. It surely has to be worth what you put into it
right? Sorry but it is unlikely.

Here is an interesting fact – Buyers will usually consider buying a variety of different types of
businesses. So (this is a BIG “SO”) the price of your business must be competitive with the buyer’s
reasonable “ALTERNATIVES”.

Note – This formula is NOT true if the buyer is specifically looking to buy ONLY your type of
business. For example, the buyer ONLY wants to buy a bakery. But don’t fool yourself – less than
5% of buyers only want only one type of business. You shouldn’t be selling your business based
on exceptions anyway.

The price of your business must be competitive with reasonable alternatives. Imagine you are a
buyer - which business would you buy below?

 Business A – Asking $200,000 - restaurant that is breaking even
 Business B – Asking $200,000 - restaurant making an annual profit of $100,000

Which business would you buy? 95-99% of buyers will buy Business B. Remember that most
businesses are priced at around 2 times the cash flow, so realize that if you are asking $100,000 for
your business, then most businesses THAT SELL at that asking price will be producing $50,000 per
year of cash flow (or profit). The number one thing buyers look for in a business is profit.

But I see businesses for sale that are asking $250,000 or $300,000 and yet are not profitable? Yes,
they are “for sale”, but not “sold”. Why do you think you don’t see that many businesses that are
priced right that are still for sale? It is because they are SOLD – because they are priced right.
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Probably 80-90% of businesses are overpriced – don’t let this fool you.
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Consider financing a portion of the sale

What is Seller Financing?

With seller financing, the buyer makes a down payment on your business and then makes
monthly payments until the price is paid in full. Some sellers erroneously think that they
have to lend the buyer money – you don’t. Keep it simple – you get a downpayment and
then you receive periodic (typically monthly) payments until you are paid in full.

How do I know how much to finance?

It has to make sense – If your business makes a profit of $7,000 per month then a note of
$4,000 per month will surely NOT make sense. Basically the profit from the business has to
be able to pay for the note, AND, pay the buyer a living wage. If it can’t then it isn’t going
to work.

The following information is based on statistics on over 10,000 business sales (please email us for
the complete study – it is actually quite interesting).

 Average interest rate – 7-8% (there is very small variance). This is based on RISK, not
prevailing interest rates. Financing a business is risky, hence the relatively high return.

 Average length of note – 5 years (varies from 3-7 years).

 Average down payment – 50% (varies from 30-70%).

 All cash deals - LESS than 10% of businesses sell for all cash.

The bottom line – If you are not willing to finance the sale or your business, then there is probably
going to be some other seller with a reasonably similar business who is.

Issue – If a business owner reports all income and shows a high profit on his/her tax return then
almost any buyer could obtain financing on the business. This obviously is not true, so must sellers
must finance the sale of the business if they are really serious about selling.

Are you unsure how to structure your sale for seller financing? Use our complete Business for Sale
Package –we cover this and many other important considerations. The cost is as low as $600 and
the package includes nearly all of the forms and other tools needed to sell your business on your
own.

Prepare Key Documents

Lease – Find your lease, read it, become familiar with it again. Many buyers will ask you specific
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questions regarding your lease. It helps to be prepared and knowledgable regarding your lease.
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Have answers to the following questions:


 What is the start date of your lease?
 What is the expiration date of your lease?
 Do you have options to renew? (Are these automatically transferred with the lease? Be
careful on this one, they oftentimes are personal to you and are NOT transferred when the
lease is assigned).
 What is the base rent?
 Does the base rent increase annually? If so, how much, specifically?
 How much are the CAM/NNN charges? Is this included in the rent or in addition to the
rent?
 What are “permitted uses”? Many buyers want to offer a new product or service – is this
allowed in the lease?
 How much is the assignment fee?
 What are the minimum requirements for a new buyer to be approved by the landlord?

Equipment List – If equipment is important to your business then it is wise to prepare a detailed
list of your equipment. Please email us at jacob@morganandwestfield.com for a sample equipment
list.

Seller’s Disclosure Statement – The number one reason buyers often do not buy a business is
because of “fear”; typically fear of the unknown. This document helps calm the buyers fears by
disclosing any potential issues with the business up front. Please email me at
jacob@morganandwestfield.com for a sample Seller’s Disclosure Statement.

Need help preparing your business for sale?

Call us today at 888-693-7834 x-101 for assistance. We can offer you assistance in preparing your business
for sale at very low costs. With over ten years of experience selling businesses, we can guide you in the right
direction and save you countless wasted hours and thousands of dollars.

We also have complete business for sale by owner packages from as low as $500. These packages include a 1-
2 hour consultation, all forms required to get an offer on your business, buyer pre-screening forms, do it
yourself guides, a complete summary on your business, a mini valuation, and much more.

Call us today at 888-693-7834 x-101 or send an email to jacob@morganandwestfield.com
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Step #2 – Advertise Your Business for Sale

Options to advertise your business for sale

Craigslist – No doubt, Craigslist does get very good exposure; however, there is not a better place to
attract more unqualified buyers than Craigslist. While you can get lucky and sell your business
using Craigslist; if you value your time then it is not a good option. We recommend using Craigslist
if you have the time and your business is less than $100-200k, however please do so with extreme
caution.

The Multiple Listing Service (MLS) – About 20-30 years ago the MLS was a great place to sell a
business, however probably less than 1% of all business brokers even think about using the MLS.
The MLS can only be accessed by licensed Realtors who typically specialize in selling residential
real estate or homes. Most residential real estate offices no longer allow their agents to sell
businesses due to the high degree of knowledge required and high potential for litigation. As a
result, the MLS is rarely a viable option to sell your business.

Newspapers – Does anyone actually read the newspaper anymore? Look in the Sunday edition of
your local paper in the “Business Opportunities” section. There are likely less than a few ads in this
section and most are for new franchise opportunities. About the only newspaper that is highly
effective is the Wall Street Journal, however, this is extremely expensive. Alternatively, you can
experiment with local community newspapers, which are often low cost, however they do not
always get a high response.

If you have a business that is “ethnic” in nature and is ONLY likely to be purchased by one
specific nationality (such as a Chinese restaurant) then you may want to consider ethnic
newspapers that caters to this nationality, such as a Chinese newspaper.

Business for Sale Sites – The most effective place to sell most businesses now is by using the
Business for Sale Sites. These sites exclusively sell businesses and show up first in popular search
engines such as Google or Yahoo! when searching for businesses for sale or to buy a business.

Below are some of the most popular sites:

www.bizbuysell.com www.mergerplace.com

www.bizquest.com www.buyabusiness.com

www.bizjournals.com www.mergernetwork.com

www.businessesforsale.com www.acquireo.com
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www.businessbroker.net www.globalbx.com
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www.businessmart.com


Summary of advertising methods – The most cost effective and efficient way to sell your business is by
using the business for sale websites. The internet today is huge and most people immediately go to the
internet when looking to make a major decision, such as buying a business. Try going to Google or Yahoo
and search for “businesses for sale” or “buy a business”. You will see for yourself the different options
available to you to sell your business.

Call us now for a free two week trial!

Are you motivated to sell your business and anxious to start introducing buyers? Call us today at 888-693-
7834 x-101 to see how our free trial works.

We can help you write your ad and begin introducing buyers in as little as a few days. Call us today for more
information at 888-693-7834 x-101 or send an email to jacob@morganandwestfield.com

Writing an Ad Copy that sells

If you have decided to sell your business using the Business for Sale websites then it is important
to write an effective ad. An effective ad is short, to the point, and touches on potential buyers hot
buttons. Click on the links in the section above to view other ads. Get a feel for the sites and see
what attracts you to different businesses.

Here are other things you can do to maximize the number of responses from your ads:

Gross Sales – Businesses with higher gross sales get more responses. What you can do –
report a higher number, use a projection, etc. – but be prepared to explain how it can be
achieved. We regularly suggest that sellers include a projected number or estimate if the
actual numbers are not available or if they are unattractive.

Cash Flow (Net) – Businesses with a higher net get more responses. This probably has the
biggest impact on the number of responses. What you can do – report a higher number, use
a projection, etc. – but be prepared to explain how it can be achieved. This will be
discussed in great depth in a later section.

Location – Businesses advertised in larger cities get more responses. What you can do –
ask us to advertise your business in a larger market area. Areas of less than a couple
hundred thousand people should be reconsidered.

Title – Catchy titles get more responses. What you can do – use a creative, catchy title.
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Here are some titles we have used that have worked extremely well “The underwear CEO”,
“Profitable virtual internet business”, “Coastal Lifestyle Business”. The title is meant to pull
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them in and nothing more.


Fast response with complete information – Ads that state that buyers will get a timely
response and access to complete information get a lot more responses. More on this later.

Ad Copy – Do longer ads get a better response? No, they actually usually get less; however,
they do tend to attract a more qualified buyer (qualified in terms of interest, not
financially). Keep the ad copy short, crisp, and to the point if you want more responses.
Write a long, descriptive ad if you are looking for highly qualified and interested buyers,
but MUCH less responses. We strongly prefer a shorter, crisper ad.

Should I sell my business on my own?

If you have the right tools, and assistance from an expert than you can sell you business on your own. With
Morgan & Westfield, we give you the tools you need to properly sell your business. We require no contracts
and our fees are low enough that it is cheaper in the long run to use our help than for you to manage the
entire sale yourself. Our rates can often be as little as 1% of the sale price.


Example of an actual Ad Copy

Example of an actual ad copy

Ok………….here goes. Here is an actual ad copy we have used – it got an amazing response.

TITLE - Lifestyle sports business 99k down on California Coast

THE AD COPY - Stable revenue, stable cash flow. Fun, extremely rewarding business; ideal
for sports oriented buyer. Shorter operating hours. Work indoors and outdoors. Highly
motivated, realistic seller with seller financing. Business is growing and is stable. There is
probably no more enjoyable business if you love sports. This seller is very serious, we have full
documentation, long term lease, and seller financing is readily available.

Have a 401k or IRA? Buy this with your IRA/401k with NO tax penalties.

EMAIL NOW to immediately SEE A FULL PACKAGE ON THIS BUSINESS. We have an
electronic NDA you can sign in 30 seconds then we send you a complete 15 page full color
summary and audio interview with the seller.

Why did it get such a great response?
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The Title – It had a catchy title and appealed to nearly every buyer. Lifestyle, low down
payment ($99k) , California Coast……………….can you ask for more?
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Numbers – The numbers were solid and we posted them.

Ad copy – The ad copy mentions exciting highlights of the business, not boring
characteristics such as square footage or length of the lease.

Call to action – The ad asks for an immediate email and offers an immediate response;
along with a complete package. This is a major hot button for buyers.

Low down payment – The seller was offering seller financing with about half down;
another hot button for buyers.

What can you do? You have a business that isn’t on the coast in California, is not making a lot of
money, and is relatively boring. What can you do to write a better ad?

Write a strong, catchy title - Find out what is unique about the business and put it in the
ad. There is something unique about your business, find it.

Numbers – If your business is not highly profitable then try using projected numbers for
the gross sales and cash flow and offer an explanation for how this could be achieved.

Ad copy – Keep the ad copy crisp and sexy. Point out the highlights (on the coast, seller
financing, verifiable numbers, long lease, etc.), NOT the boring traits such as: 5 year lease,
30 tables and chairs, north part of town, etc.

Call to action – We will fully explain this in another email. It definitely warrants a
complete explanation.

Financing – Offer seller financing. Ads with seller financing get a significantly higher
response.

There you go – this may take some time but it will be well spent. I absolutely guarantee it.

Need help? We can help you write your ad from scratch; however we charge a nominal fee for this.
Writing an ad from scratch requires a tremendous amount of energy, creative juice and a
significant amount of time to do well.

Feel free to send us your written ad for review and we can point out a few things you can change.
We do not charge for this.

Need help advertising your business for sale?

Call us today at 888-693-7834 x-101 for assistance. We have complete advertising programs for your business
for as low as $99.

We can assist you in writing your ad copy, placing the ads, pre-screening buyers, and all steps involved in
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generating qualified buyers for your business.
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Step #3 – Pre Screening Buyers

Our research about Buyers

Ok………..here is an interesting point and yet very important.

Have you thought about what it is like to look for a business from the buyer’s perspective?

Well a few years ago someone asked me this question and unfortunately I had an idea but didn’t
know for sure. So what did I do? I put on my buyer’s hat (and underwear – so I could get the full
experience) and responded to business for sale ads and…………………………………

This gets interesting. You will be shocked at what happened next.....

Here is what happened:

60-70% of the sellers or brokers did NOT even respond at all.

Of those that did respond:

Only 25% of them responded in a timely fashion.

Most sent a template email with NO additional information on the business.

Most sent forms, including an NDA to complete – all to be printed, signed and
faxed. ARE YOU KIDDING ME???? You are trying to sell me something and you
are going to make the process difficult???

Most were unprepared to sell, had incomplete information and couldn’t answer
basic questions, such as how long of a non-compete they were willing to offer or
specific seller financing terms.

The bottom line – The responses were sad. Few were prepared. Few responded and of
those that did – the responses were not timely and didn’t provide any information.

Don’t get me wrong – there were a FEW solid responses, however, they were very rare.

What can you do about it?

Respect the buyer’s time. Looking for a business is an EXTREMELY frustrating process.
Respond to buyer inquiries promptly and professionally.

Don’t respond to a buyer inquiry with “What do you want to know?” – PLEASE do not do
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this. This kind of response could not make you look less prepared.
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Respond in a timely fashion and with more information and clear action steps.


Be prepared – If you want to sell then be absolutely sure that you want to sell. Don’t waffle
with the buyer and say you are motivated but not in a hurry – buyers dont want to waste
their time.

These are all attitudinal tips – in the next section we will explain specifically how to respond to
the buyer inquiries.

How buyers respond

Buyers respond to your ads by using a contact form on nearly every site. The buyers must typically
submit their name, email, phone number and other contact information to contact you. Most sites
do not publicly display your contact information and NO sites publicly display your email address –
this greatly reduces SPAM.

Responding to Buyer Inquiries

Here is how we respond to buyer inquiries.

 A good response is timely, our responses are usually IMMEDIATE (our email program does
this automatically).

 Our responses do not appear to be a template – They are written in simple, conversational
language.

 Our responses include a brief summary (1-2 paragraphs in the email) of the business (this is
repeating what is in the ad, however, buyers need a refresher because they often are
looking at multiple ads and may forget yours) or as a separate document. We also RE-SELL
them on the business and persuade them to take the next step.

 We DO NOT include forms to print, sign and fax – Our NDA is electronic – Click on our
home page to view our NDA – www.morganandwestfield.com.

 Our responses thank the buyer for their time and acknowledge that the process is
frustrating.

 We offer buyers multiple methods to contact us – phone, email, etc.

 We include our full name and contact information – This helps build a little trust and
credibility.
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Most buyer inquiries come via email – This is because the sale of a business is confidential and
the sites are set up so sellers can sell without disclosing their business name or contact information.
Buyers must inquire through a web form. This also reduces telemarketing calls and weeds out 99%
of spammers (unlike Craigslist). The sites are monitored by live human beings and they quickly
block spammers.

What response rate do most sellers get after emailing a buyer back? From our feedback we
hear response rates of between 20-40%. Follow our advice and you should get an 80%+ response
rate or over 3-4 times the average response rate.

SAMPLE RESPONSE – The reply below is done immediately so the response is sent within minutes
of the initial buyer inquiry. This also ensures an extremely high response rate and very high follow
through.

Thanks for looking at one of our businesses for sale. This is a company that makes a hot/cold
pack for the head, hands, back, and knees. They have been sold in major sporting goods
stores, in QVC and there were negotiations to place them in Walgreens. The asking price
includes a good portion of inventory and esclusive rights to the design and sale of the
products. There are also other similar complimentary products that could be sold. The owner
is in his mid 70’s and is highly motivated and looking to retire. The business can also be
operated from anywhere in the World as the manufacturing is outsourced and the products
can be drop shipped.

We have a complete package available on this company that we can email you. In order to
do so, we ask that you briefly sign our electronic NDA online at:

http://www.morganandwestfield.com/resources/forms/nda/

The NDA takes less than a minute to complete and once we receive it, we will immediately
email you the information. We understand that the process of buying a business can be
extremely frustrating and we highly respect your time – we strive to make the process as
quick and easy as possible.

Feel free to call us anytime if you have questions.

Thanks,

Jacob E. Orosz, C.B.B.
Certified Business Broker, Principal Broker | DRE License # 01848516
Morgan & Westfield www.morganandwestfield.com
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888.693.7834 x-101 | fax 888.245.6657 | jacob@morganandwestfield.com
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What is an NDA or Confidentiality Agreement?

What is a confidentiality agreement?
A Confidentiality Agreement (also called an “NDA” or Non-Disclosure Agreement) is often
signed by potential buyers of a business prior to releasing confidential information to them
on your business.

Click below to view a sample Non-Disclosure Agreement:
http://www.morganandwestfield.com/resources/forms/nda/

How do I use a confidentiality agreement or NDA?
It is customary for nearly every business broker to respond to a buyer inquiry with a
request for the buyer to sign an NDA.

You must keep in mind, however, that when you are “selling” your business, any obstacles
you place in between you and the buyer can minimize the chances of selling your business.
Asking them to print, sign, and fax your NDA is a potential obstacle. Asking them to
complete more than one document is an obstacle.

If you are serious about selling your business, then you should respond to the buyer
inquiry with a little more information on your business (beyond what is in the ad) with
your NDA and a method to contact you if they have questions.

Should I hire a broker?

Many business owners mistakenly think if they hire a broker they will not have to get involved in the sale at
all. This is a common misconception. Regardless of who sells your business, you will still have to be
intimately during the entire process. With Morgan & Westfield, we give you the best of both worlds: low
fees and complete assistance. You can sell your business and minimize fees using our help and assistance.
We have helped many clients in the past sell their business for as low as a few hundred dollars.


The Secret to quickly pre-screening buyers

Read this over ten times. This one point alone will save you dozens of hours with unqualified
buyers. We have discovered one tiny little secret that will save you countless hours pre-screening
buyers.

Here is the process:

1. Receive a buyer inquiry
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2. Respond to the buyer inquiry via email
3. Send the buyer a brief summary of your business (1-3 brief paragraphs) in the email along
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with an NDA for the buyer to sign


a. About the NDA (this is very important) – Keep the NDA simple. It should be 1-2 pages. On
the NDA should be 1 -3 very important questions.
i. How much liquid cash do you have to invest in the business?
ii. What is your approximate net worth?
iii. What is your approximate credit score?

This process literally works like magic. Buyers who believe they are not qualified will typically put
“N/A” or leave these questions blank. Some buyers may even put that they only have $5,000 liquid
cash on a business with an asking price of $200,000. Unfortunately many buyers think they can
obtain a bank loan to purchase the business and think they may be qualified.

There is no point in asking the buyer dozens of pre-screening questions. Just ask them the most
important questions. You should only be pre-screening them financially at this point.

If your landlord or franchisor requires a buyer with a certain credit score and net worth then you
may also want to include these questions as well.

The second magical aspect – Another thing this method does is weed out buyers who have not
looked at any other businesses for sale. Buyers rarely buy the first business they look at so it may
be prudent to weed out these buyers. Nearly all experienced buyers know that they must sign an
NDA before they can get any additional information on a business for sale. Experienced buyers will
respond to your email by quickly signing and returning your NDA. These are the buyers you want
to deal with. It also demonstrates that the buyer is cooperative and is willing to respect the
confidentiality.

We don’t explain what an NDA is and why it is required – the buyers we want to deal with already
know. Inexperienced buyers will often ask why it is required and try to avoid signing it – we simply
move on to the next buyer.

What should I send after I receive the buyer’s NDA?

If you want to save time and increase the chances of selling your business, then you should prepare
a short written summary of your business that answers the basic questions that nearly every buyer
will have.

You can quickly lose buyers after the second or third round of phone or email tag. Simplify and
streamline this process and send the buyer a brief summary on your business. We call this a
“Business Summary”.

A business summary is basically a brief overview or summary of your business. It answers the basic
questions that nearly every buyer will ask you.
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Every buyer will want to know the answer to basic questions about your business after replying to
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your ad or signing your NDA.


Can you answer the following questions? A business summary addresses the following questions
quickly and efficiently; saving you countless hours with buyers (not ALL questions will apply to
your business):

 What are your hours of operation?
 What are the lease terms?
 How long of a training period are you willing to offer?
 Are you willing to sign a non-compete?
 Are you willing to finance a portion of the sale? If so, what are the terms?
 When was the business started? By whom?
 How long have you owned the business?
 Can you tell me about the product or service briefly?
 What is the history of the business?
 Can you tell me how you handle pricing?
 Who are your competitors?
 What are your major operating expenses?
 What could you do to improve your business?
 What expenses could you possibly lower?
 Are the employees willing to stay after the sale?
 How much do you pay your employees?
 Are they paid benefits?
 Are there any key employees?
 What licenses are needed to operate the business?
 What were the gross sales for the previous 3 years?
 How profitable is the business?
 Who is the landlord? Is he/she a large national landlord or small, local landlord
 Do you have a websites?
 Financial questions – what is your average accounts receivable, accounts payable, etc?
 What percentage of your sales are cash sales?
 Who does your bookkeeping and how often is it done?
 How much inventory do you currently have? Is it included in the price?
 How much working capital is needed to operate the business?
 What is all of the equipment, furniture and hard assets worth?
 Is bank financing available for this business?
 Description of premises and lease terms – square feet, length of lease, terms, NET/CAM,
options to renew, annual increase, security deposit?
 Is the business seasonal?
 Are any family members working in the business?
 How many employees do you have? Full time, part time? Contract workers?
 Is any equipment on lease?
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 Is any equipment on loan from suppliers?
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 Is any equipment not included in the sale that is located at the business?


Click below to view a sample business summary:

http://www.morganandwestfield.com/wp-content/uploads/2011/06/MW-Sample-Business-Summary.pdf

The Secret to selling your business the most efficient
way possible

Here is the method we use to sell businesses with the minimum possible effort:

1. Advertise the business for sale using the business for sale websites
2. Receive buyer inquiries
3. Immediately send the buyer a brief email on the business (1-3 pargraphs) and an NDA to
sign if the buyer would like to see the full package (Business Summary)
4. Receive the buyers’ NDA and check to see that they are qualified financially
5. Email the buyer the Business Summary
6. Interested buyers then typically call or email to set up an appointment to physically see the
business

Once this process is set up, it takes less than an hour per month to pre-screen buyers and set up
appointments (we automate this process, however it should still take you less than one hour per
month). You are left with pre-screened and interested buyers who phsyically want to see your
business and know the answers to dozens of questions about your business. There is little left to
discuss other than answering a few more questions, showing the buyer the business and possibly
discussing an offer to purchase.

How many inquiries should I get from my ads?

On average, over the last year, most ads have averaged around 3-5 qualified responses per month
for us. Remember it only takes one buyer to sell your business. A “slow” ad will get 1 or 2 responses
per month. A very good ad will get more than 10 responses per month.

Examples of number of responses we have gotten:

 Lifestyle business – 20 per month
 Auto repair in rural town – 1 per month
 Zero money down restaurant in Orange county – 40+ per month
 Fitness studio – Asking $15k – 10 per month
 Manufacturing Company – Asking $10,000,000 – 20+ per month
 Auto glass company – 5 per month
 Frozen Yogurt Shop – 5 per month
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 Restaurant in large city – 5 per month
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Need help pre-screening buyers?

Call us today at 888-693-7834 x-101 for assistance. We have offer buyer pre-screening for as little as $49 per
month. We immediately respond to buyer inquiries sending them additional information on your business
along with a link to an electronic NDA customized for your business.

This greatly reduces phone and email tag and leaves you with pre-screened, interested buyers.


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Step #4 – Show Your Business to Buyers

Wait for Questions

You have advertised your business for sale. You have pre-screened the buyers and sent those
qualified buyers your Business Summary. What do you do now?

The next step is simple. Wait for buyers to contact you with additional questions. You may follow
up with the buyers if you like, however we dont think this is necessary. It is probably a good idea to
call the buyer when sending him/her your Business Summary and introduce yourself to the buyer.
We don’t do this – we simply receive the buyer’s NDA and immediately send the buyer the Business
Summary. Most buyers appreciate our direct, fast approach, however as a seller it may make the
process more personal if you call the buyer in addition to sending them your Business Summary.

After buyers receive your Business Summary, they will typically call or email you if they have
questions.

What should I do after I send buyers my Business Summary?

You really don’t need to do anything. Most buyers will contact you if they have questions or are
interested in your business. You can follow up with those buyers who don’t contact you back. We
recommend doing this in a few days or a week after you receive their inquiry. We don’t do this,
however, you can do this if you are highly motivated and are in a hurry to sell.

Set a meeting

What do I do with interested buyers?

Set a meeting. Set a meeting. Set a meeting.

Interested buyers will likely call you and have specific questions for you. Do or say anything you
can to set a physical meeting. This ALWAYS increases the chances of a successful deal. Get the
buyer to invest time. Meet the buyer and establish trust. Show them the business. It is ok to answer
their basic questions; however you should gently persuade the buyer to come see you.

Why do you think we only include 2-3 pictures in the Business Summary? This is so we leave some
curiosity in the buyers mind and it gives them a reason to come see the business and meet you.

You can tell them that you have additional information at the business that you would like to share
with them; such as your financial statements, the detailed Seller’s Disclosure Statement or any
22

other documents they may want to see. Try to avoid emailing these, especially your financial
statements. Get them to come meet you.
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The showing

What do I do when the buyer comes to see the business?

I like to immediately show the business to the buyer – after a very short getting to know
each other introduction.

At this point they usually haven’t seen the business and are dying to go for a tour. Don’t sit
down and have small talk for 20 minutes – the only thing on the buyers mind is that they
want to see the business – show it to them then have the small talk later. Let the buyer ask
as many questions as they like. Answer them as best and straightforward as you can. You
can get to know each other during the showing, and you can casually ask them questions
about themselves and share like information about yourself.

Show them the business – explain as much as you can. Show pride in your business. Weave
in little tidbits about the history, ways to grow the business, and what you like/dislike
about the business.

Be honest – point out some of your dislikes about the business – this will make you look
more credible to the buyer. It may be smart to point out some things that could be
changed such as “I hate marketing; I wish I knew how to market this business better”.

Avoid the following:

• Don’t show tax returns

• Don’t show bank statements

• Don’t discuss the financials during the showing – tell them that you can sit down and
discuss this

• Don’t disclose proprietary secrets

The importance of consistency:

Read your Business Summary inside and out. Memorize the info contained in it. It is
extremely important to present the information about your business in a consistent fashion
to interested buyers. Buyers will notice inconsistencies and will then begin to doubt
everything you tell them.

Disclosing the right amount of information
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What is the next step?
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Don’t stuff the buyer’s head full with too much information. Keep the meeting the right
length – you will only know by feel. Keep some things a mystery – tell them that if they are
interested, and come back for a second time, then you will show them something really
interesting about the business.

If they are interested they may come back for a second meeting. Some buyers make an
offer after the first meeting. Some don’t. There is no magic formula. The right number of
meetings is probably between 1-4.

When is enough enough?

Is the buyer requesting a 6th or 7th meeting? Don’t waste your time – move on.

This is very important – when selling a business you are making certain representations
regarding your income, etc. These representations are not verified before an offer is made
so there shouldn’t be a need for 5 or 6 meetings. The in depth investigation of your
business is made after an offer is ACCEPTED and this time period is called “due diligence”.
A few meetings should be sufficient with the buyer. It should be enough for them to decide
if they want to make an offer and move forward.

Why is my buyer requesting so much information and meetings?

Fear – that is the only reason.

It is fear of the unknown. They likely have never owned a business before, and may be
scared to death. Your job is to make them feel comfortable. If you are financing a portion
of the sale, then you can tell the buyer that you wouldn’t finance the sale if you didn’t
believe in it. Also, explain to the buyer that if they make an offer they will get plenty of
time to do their research (due diligence).

Using assistance intelligently

If you approach the sale of your business intelligently then you can maximize the sale price while
minimizing fees. At Morgan & Westfield, we focus on maximizing what you are left with after the sale. We
can save you tens of thousands of dollars by advising you on some of the following items:

*Minimizing taxes from the sale of your business
*Structuring seller financing while protecting yourself
*Exploring creative financing strategies
*Gaining maximum exposure for your business
*Assistance with deal structuring
*Purchase agreement preparation and review
*Due diligence guidance
*Assistance with minimizing closing costs and escrow fees
*And dozens of other critical considerations....................
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Call us today at 888-693-7834 x-101 to see how we can help. Our rates can often be as low as a few hundred
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dollars for the sale of $100,00 + business.


The purpose of Due Diligence

Is the buyer requesting too much information? Have you met with the buyer 4,5 or 6 times? You
should explain to the buyer that this thorough investigation is done after an offer is made and
accepted. This time period is called “due diligence”. Due Diligence is typically 30 days, however, can
be any length of time that you and the buyer agree upon. The buyer can usually back out during
this time period for any reasons. They should, however, make a reasonable effort during this
period.

Which documents to disclose before an offer is made

So you are talking with several interested buyers and a few of them asked you for tax returns and
bank statements and some other sensitive information. What should you do? How should you
handle this situation? Should you show these documents without having an offer in hand?

What guidelines should I follow when dealing with buyers and deciding what I should
show them?

Before receiving an offer, you should be cautious with what you show to buyers. Certainly
be helpful and engaging with the buyer, but do not give them everything they ask for. At
some point you should politely and tactfully ask them to present you with an offer.

Here is what is commonly shown to buyers before receiving an offer:

 A summary on the business
 Profit and Loss Statements (Past years and Year to Date)
 Balance sheet
 Lease summary or abstract (not the whole lease)
 Equipment list
 Sales literature, brochures, etc

These items are usually released after an offer is made
 Customer lists
 Tax returns
 Bank statements
 Invoices and receipts
 Full copy of the lease
 QuickBooks file or full Financial Statements (General Ledger)

The buyer says he isn’t going to move forward without first seeing the Tax Returns and
bank statements. What should I do?

Politely explain that all buyers say that and if you complied with every buyers’ request,
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then a dozen or so copies of your tax returns and bank statements would be floating all
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over town.


The buyer is going to walk, what should I do?

Call him on his bluff (tell him no) and see if he walks. If he does then call him back and tell
him you thought about his situation and you completely understand, you talked to your
wife, you prayed to god, you asked your priest, you have seen the light, blah, blah blah. If
your records are good, then I suggest setting up a meeting with the buyer in person, at
your place of business. Have the documents they requested lying on your table. Let the
buyer spot check some of the documents for a short period of time. Give them confidence
that you have the backup material to satisfy their due diligence requirements. Do NOT give
them copies to take home. After they are done, press them for an offer.

This type of buyer could just be seeking reassurance that they are making a good decision.
Buyers typically do this by trying to acquire more information. More information will not
make their fears go away. You have to challenge them and ask them for an offer.

Is there a better way to explain this process to the buyer?

Yes. Explain to them that you are making representations. These representations will be
verified during due diligence. Give them verbal reassurance in the quality of your backup
information. Explain to the seller that their earnest money deposit will be held by a
qualified and licensed escrow agent.

Need advice on dealing with buyers?

Call us today at 888-693-7834 x-101 for assistance. Our complete business for sale by owner package
includes all of the forms and guides to pre-screen buyers, show your business to buyers, and assist the buyer
in preparing a term sheet or offer to purchase. This package starts from as low as $500 and includes nearly
everything you need to sell your business.Our process is amazingly simple and once set up, requires only a
few hours per month to execute properly.


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Step #5 – Negotiate an Offer

Talk terms

Have an interested buyer? Don’t panic. Talk with the buyer. You will want to agree on the
following basic terms:

1. Price
2. Amount of earnest money deposit and who is going to hold it
3. Terms
4. Length of due diligence
5. Training period
6. Non-Competition Agreement
7. Name of closing agent or attorney
8. Any contingencies

Don’t waste your time preparing a ten page purchase agreement if you can’t even agree on terms.
Simply talk with the buyer and see if you can agree on terms. If you can agree on terms, then we
suggest putting them on a one page offer to purchase form, or a term sheet. This helps you move
the deal forward without having to worry about the purchase agreement. Please contact us if you
need an offer to purchase form.

The different types of offers

Term Sheet

A term sheet is used for discussion purposes only, and allows you to focus on the
structuring of the deal without worrying how it looks on paper. If you can agree on the
term sheet, then you can move straight to an offer to purchase, or a definitive purchase
agreement.

We have combined our term sheet and offer to purchase into one simple form. This is a
simple document that can be signed, and also allows the parties to focus on the deal
without worrying about the language.

We see many sellers make the mistake of picking up the phone and calling an attorney
before they even have a real deal. The issues here can be varied and it pays to have an
experienced individual look at the deal. Call us anytime. We do not charge to review your
deal. Our fees for closing the transaction can be as low as 1%, oftentimes with no
fees until the actual closing.

Letter of Intent

Letters of Intent are similar to term sheets and can be an effective tool if used properly.
27

Again, they are great for discussion purposes, however, they should be replaced by a
binding offer if you are commiting to the buyer. We see many sellers accept an open ended
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Letter of Intent (no expiration date or termination rights on their part) without accepting


an earnest money deposit or qualifying the buyer. This is a huge mistake and can cost you
dearly if you commit to the wrong buyer.

Offer to Purchase

Offers to purchase range in length. We have combined our term sheet and offer to
purchase into a one page form. Obviously, this shorter document does not contain all of
the necessary language, however, it does allow the parties to commit to the terms and
move the deal forward.

It is very important that a shorter offer to purchase form, letter of intent, or term sheet be
replaced by a more comprehensive offer to purchase. The language we use typically looks
like this:

“Seller and buyer agree to replace this offer to purchase/Letter of Intent with a
definitive purchase agreement within 5 business days of acceptance”.

“Definitive” Purchase Agreement

This is the document that is actually signed at closing. This is a comprehensive agreement
that is signed at closing by all parties. It may not make sense to start the process with this
document as it may intimidate some buyers and may also be unnecessary if the buyer is
not qualified. As we mentioned above, it may make sense to start the negotiations with a
term sheet/letter of intent or a simple one page offer form.

Further qualifying the buyer

At this stage, it makes sense to further qualify the buyer.

You may tactfully ask the buyer to provide you the following:
1. Personal Financial Statement
2. Buyer’s Disclosure Statement
3. Buyer Profile and Questionnaire

You can either ask the buyer for this information before you begin preparing the offer, or
you can stipulate in the offer/purchase agreement that the buyer will provide this
information within 5 business days of acceptance (or any other time period you specify).
This effectively makes the due diligence mutual, which allows you to cancel the offer if you
do not approve the buyer. This is a very important strategy and can potentially save you a
lot of stress and wasted time.

Email me at jacob@morganandwestfield.com for these documents.

Keep your focus
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The number one mistake sellers make when they find a buyer:
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Most sellers get too excited and lose their focus when they find a buyer. More than 50% of
deals dont make it to the closing table. Focus on continuing to run your business and
obtaining additional back up offers.

Many sellers also take their business off the market – a huge mistake! What do you think
this does to the buyer? If you want to keep your negotiating position then keep your
business on the market, continue to show it and accept back up offers. This will keep the
buyer on his (or her) toes, and prevent them from playing games.

About making an offer:

We have provided you with a simple offer to purchase form. Keep this phase simple and
discuss the basics of the deal with the buyer.

Assure the buyer that they will get plenty of time to conduct their research and due
diligence after they make the offer. Assure them that they are still not committed 100%
until they finish their due diligence period.

What about an earnest money deposit?

We ALWAYS (ALWAYS, ALWAYS, ALWAYS) recommend getting an earnest money
deposit. This shows good faith and lets you know that the buyer is serious and is also
psychologically commits the buyer to a greater degree. You are also exposing a lot of
information to the buyer regarding your business and obtaining an earnest money deposit
is a reasonable thing to do.

A typical earnest money deposit is about 5% of the purchase price of the business;
sometimes with a $5,000 minimum. You can, however, negotiate for any deposit you like.
An offer with a higher earnest money deposit carries more weight and many buyers know
this and are willing to put down a larger deposit.

The earnest money deposit is typically held by a third party such as an escrow company or
attorney. Contact us for more information.

What about further pre-qualifying the buyers?

We have provided you with 3 other buyer pre-qualification forms. There is no magic
formula for when these should be introduced. At the least, a buyer should complete these
either with the offer to purchase or they should agree to provide these within x days
(typically 3 days) of you ACCEPTING their offer to purchase.

You can ask that the buyer complete these forms at any time you wish. We probably
recommend asking that they complete these on their second visit. We also recommend
introducing these anytime they request any additional in-depth information or if they want
to take information home with them.

Use your common sense and call us if you have specific questions regarding this.
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Need help preparing an offer to purchase or dealing with your buyer?

Call us today at 888-693-7834 x-101 for assistance. We can assist you in preparing your offer and guiding you
through due diligence, all for one low fee at closing. Our rates are generally 1% of the purchase price and we
can often structure our fee so it is paid only in the event of a successful sale.

With over ten years of experience in selling businesses, we can often bring you exponentionally more to the
table than the fees we charge. Mistakes in the last few stages can be costly and it pays to have an expert by
your side every step of the way; all for one low contingent fee.


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Step #6 – Due Diligence

What is Due Diligence?

When a buyer makes an offer on your business, there is a period of time that follows where the
buyer researches your business and further investigates your business. This period of time
“typically” lasts 2-4 weeks and is called “due diligence”.

Typical document requests and items investigated by buyers during this time period can include
the following:

 Financial Statements
 Tax Returns
 Bank Statements
 Leases – premise lease, equipment leases, etc.
 Any third party contracts such as supplier or vendor contracts
 Sales and Use Tax Reports
 Staffing and Payroll related documents: job descriptions, employment contracts, etc.
 Insurance related documents: Workers compensation, health insurance, liability insurance,
etc.
 Equipment inspection
 Licenses and Permits
 Marketing, advertising, and promotional documents
 Environmental documents and inspections
 Franchise related documents

The list above will not be typical for every business. Every business will have its own unique due
diligence structure.

How long is due diligence?

Due diligence can be ANY period of time that you and the buyer agree to. The typical due diligence
period for small businesses is typically 30 days.

The length of due diligence should be based on the following:

1. The availability of information – The quicker you can respond to the buyers document
requests, the shorter the due diligence period should be.
2. The speed at which the buyer reviews the information – The more organized and clearer
31

the information you provide to the buyer, the shorter the due diligence period should be.
3. Communication between you and the buyer – The more available you make yourself to the
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buyer the shorter the due diligence period should be.


Have a question? Need guidance?

Call us today at 888-693-7834 x-101 for assistance. We love helping small business owners. With over twenty
years of experience selling businesses, we can save you a tremendous amount of time, money, and
headaches. It is our goal to help you sell your business at the highest possible price, while helping you
minimize transaction fees.


What is the purpose of due diligence?

Businesses are complicated and hundreds of different things must be taken into consideration
when looking to purchase one. Whereas with a house, you can look at it and quickly form an
opinion, a business involves many intangible variables that are often not readily apparent. With a
business, an offer must be made and then the representations are verified after there is an
agreement on the terms. If all buyers conducted their due diligence before making an offer, then
you would spend a tremendous amount of time with many buyers whom you may never reach an
agreement.

Preparing your business for Due Diligence

Preparing your business to sell it greatly increases the chances that you will actually sell it.

Preparing your business for due diligence is simple. It involves preparing and organizing the typical
documents that most buyers will request and review during the due diligence period.

Why should I prepare for due diligence? Can’t I just get the documents ready when the buyer
requests them?

1. By preparing in advance, you may convince the buyer to agree to a shorter due diligence
period, perhaps as short as 7-14 days. Your reasoning is that all the documents are
prepared, organized, ready for review and the process will be quick and simple.
Immediately after an offer is accepted, the buyer can start reviewing the documents.

2. By demonstrating to the buyer that you have prepared the business for sale, you tell the
buyer that you are serious. Buyers like dealing with serious sellers. Believe it or not, many
sellers “throw” (their words, not mine) their business up for sale because they are curious
what buyers think of their business and are trying to determine what it is worth. After a
buyer has encountered an unmotivated seller, they become quite interested when they
32

know you are 100% serious and have all your documentation in order. Buyers are more
likely to spend time with a seller whom they know is seriou,s and has prepared for the sale.
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3. You greatly increase the chances of receiving an offer by demonstrating to the buyer that
you have prepared and organized all documents needed for due diligence.. Many times,
buyers are reluctant to make an offer on a business because they believe you have little
information for them to perform their due diligence.

What other tips do you have for me?

If you have prepared your business for sale and organized these documents, it wouldn’t
hurt to mention that in your ad copy. It could say something like this:

“I am a very motivated and serious seller and have prepared my business for sale with the
help of my CPA/Broker. I have all documents ready for due diligence, including financial
statements, tax returns, bank statements, lease, equipment list, etc”.

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Step #7 – The Closing

Get help

Get help, period. Don’t handle the closing on your own. One small mistake can cost you tens of
thousands of dollars. You can have your local attorney handle the sale or call us. We generally
charge 1% of the purchase price and can structure our fees so we are paid only in the event of a
successful sale, thus minimizing your risk.

When to call – Call us during the due diligence process so we can review your deal and help you
properly prepare for the closing.

Documents required at closing

Following are “typical” closing documents and tasks that need to be completed prior to
closing:

 Asset Purchase Agreement – Generally 5-6 pages, this outlines your agreement with the
buyer.
 Bill of Sale – This is the actual document that transfers possession at closing.
 Equipment List – This must be attached to the Bill of Sale.
 Buyer’s Disclosure Statement – This further reduces your liability post closing for any
disclosures the buyer may not have made.
 Allocation of Purchase Price – This MUST be filed with the IRS at the end of the tax year.
Failing to do so can expose you to large penalties.
 Non-Compete Agreement – this is a separate document and agreement signed by you only;
typically notarized.
 Training Agreement – This agreement spells out your agreement with the buyer to train
him/her. It is important to get the buyer to sign off on the training when it is complete so
there are no disputes. If you fail to do so then the buyer could potentially later refuse to make
payments on your note; offsetting the note claiming you failed to train them properly.
 Holdback agreement for training – If it is an all cash deal then savvy buyers may request
that not all money is released until the training is complete.
 Termination and transfer of DBA’s associated with business – If the buyer wishes to
operate under the same trade name, then you must terminate your DBA/FBNS and tranfer it
to the buyer.
 Transfer of utilities – A clause should be contained within the purchase agreement to
transfer the utilities in a timely manner. Failing to do so could leave you responsible for the
34

utilities until they are transferred.
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 Transfer of websites, phone numbers, etc. – Other assets of the business should be
outlined and a clause should be contained in the purchase agreement whereby you agree to
transfer these to the buyer at closing.
 Buyer forms new entity (Corporation, LLC, etc.) – Timing here is critical. We have seen
deals delayed for up to two months because the buyer did not form their entity in a timely
fashion.
 Buyer applies for licenses, permits, etc. - A list of permits and licenses must be made and
the buyer must apply for these. Caution is recommended here as timing is important and
must be coordinated with multiple other closing tasks.
 Transfer of merchant accounts – A buyer must be properly licensed and have bank
accounts, etc. before applying for a new merchant account.
 Buyer must open new bank account in business name – Buyer must be properly licensed
(DBA, business license, entity formed, etc.) to open a bank account in the business name.
 Notice to creditors – A notice to creditors must be filed in 13 states in which this law is
mandated. Failing to do so can leave you open to exposure for many years to potential third
party claims.
 Landlord/Lease assignment documents – If the lease is being transferred, this must be
approved by the landlord in writing, and coordinated with closing. You dont want to transfer
the lease until closing –timing here is critical.
 Financing documents, if applicable – If third party financing is involved, then there are
mutliple other documents that often must be completed such as business plans, projections,
etc.
 Promissory Note – If seller financing is involved, then this should be put into an agreement
and signed by the buyer.
 Security Agreement – If seller financing is involved, then it is wise to place a lien on the
assets of the business until you are paid in full. Doing so will prevent the buyer from selling
the business or further encumbering the business without your permission.
 UCC Financing Statement – If seller financing is involved and you are placing a lien on the
assets of the business, then it is wise to file a notice (lien) with the appropriate filing office.
 Sales tax clearance – If your business collects sales tax then you must get a clearance
certificate for the buyer prior to closing. Failing to do so could expose the buyer to unpaid
taxes.
 Payroll tax clearance – Another critical component. You will want to document that your
payroll taxes are paid and current.
 Escrow instructions – It is not wise to handle the money yourself. The funds should be held
by an independent third party and placed into a licensed trust account.
 Closing adjustments/prorations – Multiple adjustments and prorations must often be
made (lease payment (s), utilities, property taxes, accounts receivable, etc.).
 Transfer of any intellectual property – If your business owns any intellectual property then
this must be transferred property to the buyer and documented (patents, copyrights,
35

trademarks, etc.).
 Transfer of any third party contracts – yellow pages, advertising, equipment leases, etc.
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 Corporate Resolution – If your business is a corporation or LLC then proper document must
be drafted, authorizing you to dispose of the corporate assets.

VERY IMPORTANT – The list above is in absolutely no way complete. It simply represents
“typical” documents and steps required to close. All business closings should be handled by
a licensed professional only. The above list is provided for illustrative purposes only.

Need help with the closing?

Call us today at 888-693-7834 x-101 for assistance. Have a buyer? Unsure what to do? Need help with
preparing a purchase agreement or the closing?

We can help you once you locate an interested buyer. We can also discuss your deal preliminarily and see if
it is appropriate for you to prepare a purchase agreement or conduct further negotiations with the buyer.

Our rates – We generally charge 1% of the purchase price and can even structure our fee so it is only paid in
the event of a successful closing.


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Our Services

Buyer pre-screening

We pre-screen buyers for you, getting interested buyers to sign a customized electronic NDA for
your business. Pre-screened buyers are then sent directly to you for approval. Rates are $49 per
month.

Complete business for sale by owner package

Our complete business for sale by owner package includes almost everthing you need to sell your
business on your own. Rates are from $500-800 for the complete package.

Pre-Screening forms
 Buyer inquiry email templates – We supply you with proven emails used to
respond to buyer inquiries.
 A teaser profile for your business – Typically 5 pages, this is sent to interested
buyers along with your NDA. This increases the chance buyers will quickly
respond.
 NDA – We prepare a customized NDA for your business based on language we
have successfully used for years.

Business Summary and documents
 Business Summary – We prepare a 12-20 page complete full color package on your
business. Please contact us for a sample. We have been told by numerous buyers
that ours is the best in the industry.
 Seller’s Disclosure Statement – We provide you with this document which helps
buyers feel comfortable that there are no undisclosed problems regarding the
business. A mini version is incorporated into the Business Summary.
 Equipment List – This document is a list of all of the assets included in the sale of
the company. A mini version is incorporated into the Business Summary.

Buyer pre-qualification forms
 Buyer Profile/Questionnaire – This document asks the buyer important questions
(bankruptcy, criminal history, previous business ownership, etc.). Having this in
writing is very important.
 Buyer Personal Financial Statement – Having the buyer put their financials in
writing with a signature can put you at ease that the buyer has the funds and is
qualified. Knowing up front that they are not qualified can save you countless
wasted hours and thousands of dollars.
 Buyer’s Disclosure Statement – This documents asks the buyer important legal
37

questions and gives them an opportunity to disclose post bankruptcies, licensing
violations, arrests, etc.
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Offer to Purchase Forms
 One Page Offer/Term Sheet – We supply you with a simple, fill in the blanks
purchase agreement, that allows you to agree on terms with a buyer. After you
come to agreement, we suggest you call us for assistance with due diligence and
the closing.

Benefits of our Complete Business for Sale by Owner Package

1. Increased chances of a successful sale – By following a formula we have successfully
used for years, you will greatly increase the chances of a successful sale.

2. Decreased stress – Selling a business has been ranked as one of the top 5 most
stressful events (after marriage, birth, divorce, and bankruptcy). Using our process
minimizes this stress by streamlining and simplifying the process. We use this same
process and spend less than 10 minutes per day pre-screening buyers for multiple
businesses and giving them information on our businesses for sale (most of it is
completely automated).

3. Impress buyers – By being prepared, buyers will see that you are serious about selling.
They will also respect the fact that you are handling the sale professionally and will
likely treat you with more respect in return.

4. Save time – Our buyer pre-screening process requires a minimum amount of time and
will save you countless wasted hours with tire kickers or unqualified buyers.

5. Decreased litigation – By using a consistent process and documenting your
representations, you may potentially minimize potential future litigation. Many
lawsuits are “he said/she said” related and having a written document with your
representations helps clarify these issues. The seller’s disclosure statement also gives
you the opportunity to make any disclosures in writing up front.

6. Increased asking price – By clearly presenting your business in the best light possible
and pointing out its highlights, you can increase the ultimate selling price of your
business.

Financial Statement recasting/normalization

We recast/normalize 3 years of financial statements for you, providing them to you in both
an Excel spreadsheet and PDF document that you can supply to buyers. A template is given
to you for future adjustments. Rates are from $100-500. Please email 3 years Profit and Loss
Statements to jacob@morganandwestfield.com for a quote.

Assistance with closing
38

Call us today at 888-693-7834 x-101 for assistance. Have a buyer? Unsure what to do? Need
help with preparing a purchase agreement or the closing?
Page


We can help you once you locate an interested buyer. We can also discuss your deal
preliminarily and see if it is appropriate for you to prepare a purchase agreement or
conduct further negotiations with the buyer.

Our rates – We generally charge 1% of the purchase price and can even structure our fee so
it is only paid in the event of a successful closing.

Call us today for a free deal review at 888-693-7834 x-101 or send an email to
jacob@morganandwestfield.com

Do you have additional questions?
Do you have more questions? Email or call us anytime with your questions. You can reach us at
888.693.7834.

Do you have comments on this package? Please let us know. We are always looking for ways to
improve our processes and make the process simpler for you.

39
Page


The ultimate guide to selling your business

The ultimate guide to selling your business

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