Selling a business is a complex and demanding process. There are many areas that simple mistakes can be made such as the best price to list the business for sale, what legal forms to use, what taxes need to be paid or better still, how taxes can be minimized and so much morfe. This presentation provides a summary of what needs to be considered.

1. How to sell your business
By
Andrew Rogerson

2. Welcome
• Thank you for attending
• Other material available up front
– Sample documents
– Flyers and sales material
– Sample: Successfully Sell Your Business:
Expert Advice from a Business Broker
• Please ask questions

3. Introducing…
Andrew Rogerson
• Profession - Business Broker
• Small business ownership 24 + years
• Five time small business owner
– Two businesses in Australia
– Three in California
– Last 13 years in Sacramento
• CA Department of Real Estate license # 01757166
• Certified Business Intermediary (CBI) with IBBA
• Certified Business Broker (CBB) with CABB

4. Introducing (Cont’d)
• Certified Machinery & Equipment Appraiser
(CMEA) with NEBBI
• Certified Senior Business Analyst (CSBA)
• Member of the Sacramento Metro Chamber
of Commerce
• Author four books including:
– Successfully Sell Your Business: Expert advice from
a Business Broker

5. Goal of this presentation
• Introduce the many steps to sell a Main
Street business
–Allow you to understand the processes
–Research and apply to your business
–Allow you to create a plan
–Allow you to decide what’s important

6. What’s a Main Street Business
• NOT:
– Publicly held companies
– Privately held companies with sales >$30 million
• IS:
– Privately held companies with
• Sales up to about $3 million
• Generally an owner/operator

7. Why Main Street?
• Valuation method
– Uses Discretionary Earnings – not EBITDA
• Types of Sellers
• Types of Buyers
– Individual or Corporate Executive – control of their life
– Unemployed – looking for a job
– Synergistic – competitor or already in your industry
– Investment – hires a manager & wants a ROI

8. 10 areas to research & understand
1. Tax Planning
2. Accounting
3. Legal review – Part 1 & Part 2
4. Personal Financial Planning
5. Personal Future Planning
6. Build your Team
7. Financing the sale
8. Valuing your business/assets
9. Sales and marketing plan
10. Other parties in the transaction

9. Tax Planning
• Entities and their tax treatment
– C Corp, S Corp, Partnership, LLC or Sole
Prop
– Check your tax consequences if you sell
• Purchase Price Allocation
– Seller and Buyer have different needs and
this has different tax consequences for each
party.

10. Accounting
• Is anybody here from the IRS? 
• Report ALL earnings at least 12 months prior
to selling…
– So it reflects in your valuation and ultimate price
• Need - Current and accurate Profit and Loss
Statement (P&L)
• Need - Tax Returns (Last 3 years)

11. Legal Planning – Part 1
• Check ALL Owners agree to sell
– Divorce – what does the other ½ get?
• Broad Agreement on price and terms
• Legal contracts up to date? - suppliers,
employees, customers, finance, landlord etc
• Read existing contracts for “gotcha’s” e.g.:
lease, equipment finance leases, franchise
agreement etc

12. Legal Planning – Part 2
• Documents to sell the business
– Confidentiality Agreements
– Asset Purchase Agreement
– Sellers Disclosure
– Buyers Disclosure
– List of Fixtures, Furniture and Equipment (FF&E)
– Lease
– Franchise Agreement
– Profit & Loss Statements, Tax Returns etc

13. Personal Financial Planning
• How will you invest the sale proceeds once
the business sells?
– Trust: Living, Charitable, Testamentary etc?
– Retirement account?
– Health Insurance account?
– Shares/Mutual funds/Bonds etc
– Wills/Heirs

14. Personal Future Planning
• What will you do once the business sells?
– Play golf?
– Spend more time with grandchildren?
– Travel?
– Join the Peace Corps?
– Solve world peace?
• Note: Sellers change their mind about selling
because they lose structure and familiarity

15. Team planning
• Recommend two teams
– Primary team
• Spouse and/or family member and one trusted friend
• Secondary team
– Professionals you can hire
• Attorney/Accountant/Financial Planner
• Business Broker
• Critical ingredients = Trust and Ethics
• Try to avoid changing the team for continuity

16. Financing the sale
• How will the sale be financed?
– Cash - Highly unlikely
• Buyer with $300,000 cash will buy a $900,000 business
– Seller financing
– SBA loan program
– Conventional loans from a bank
– Commercial Real Estate loan
– Factor accounts payable and receivable

17. Valuing your business
• Determine what’s being sold and valued
–Business
–Machinery and Equipment
–Real Estate
–Intellectual Property
• Main Street businesses sell for multiple
of Discretionary Earnings

18. Valuing your business (Cont’d.)
• Types of business valuations
–Brokers Opinion of Value (Cost $500 to
$1,000)
–Standard Valuation (Cost $2,500 to
$5,000)
–Full Appraisal (Cost $4,000 to $10,000)
• Do not overpay

19. Sales and marketing plan
• Executive summary – Blind?
• Confidential Business Review (CBR)
• Direct Mail
• Newspaper Advertising
• Web
• Trade Association
• Newspaper Business Opportunity section
• Magazines – Inc or Forbes

20. Potential “Deal Killers”
• Family
• Landlord
• Attorney or Accountant
– Selling a business comes with risk
• Franchise
– Check your UFOC
• Lender
• Each business is unique – what’s important to sell
your business?

21. Review your options
• You’ve done your research and plan –
what are the options?:
–Do nothing
–Close the business down
–Sell to a family member or friend
–Sell the business
• If you decide to sell …

22. If you decide to sell…
• Make sure it’s what you want
– It is not a quick process
– It is an emotional process
– It is a complex process

23. Seller V Buyer
• Seller and Buyer are looking for different
outcomes

24. What the seller would like
• All cash
• Provide one week of training
• One day of Due Diligence
• Receive an offer and close escrow two
days later
• Sell at 5 to 6 times Discretionary Earnings

25. What the buyer would like
• Downpayment of 10% of purchase price
• 6 months training for free then close
escrow
• 4 weeks of Due Diligence
• 4 week “Test Drive” of the business
• Buy at 1 times Discretionary Earnings

26. Where they end up meeting
• Buyer downpayment equal to Discretionary
Earnings
• Seller provides some finance
• 2 to 3 weeks of free Seller training
• Two weeks of Due Diligence
• Close escrow 45 to 60 days after offer
accepted
• Sold at 2 to 3 times earnings

27. The perfect business
• A reasonable price
• A reasonable down payment (About 30%)
• Some Seller finance
• Reasonable sales (hopefully increasing each year)
• Discretionary Earnings of $60,000 pa or more
• A compelling reason for sale
• A desired industry type
• Good and attractive location

28. 8 reasons a business does not sell
1. Sellers starts process and sees the complexity
2. Seller fears the future
3. Seller receives no offers or lower than expected
4. Sellers next phase of their life less appealing
5. Seller wants all cash and can’t get it
6. Due diligence problem: environment, govt., legal
7. Seller unwilling to accept what the market offers
8. Records not support income, expenses & profit

29. Conclusion
• It is:
–Complex
–Demanding
–Frustrating
–Time consuming
–Emotional
–Rewarding & a relief…when it’s done

30. Questions?
?

31. Thank you
Andrew Rogerson
Ph: (916) 570-2674
Email: andrew@Andrew-Rogerson.com
Web: http://www.Andrew-Rogerson.com