This document outlines considerations and steps for selling a business venture. It discusses personal reasons like burnout or health issues, and business reasons like needing capital or new competition. Key steps include determining the company's valuation based on finances and strategic value, identifying the best buyer candidates like competitors or financial buyers, and choosing the best tax method like stock-for-stock. It also recommends keeping finances and projections updated, maintaining the business well to attract buyers, and allowing up to a year for the selling process from identifying candidates to closing the sale.

1. Harvesting and Exiting
the Venture
Sell the Business
Chapter 14

2. Presentation Outline
• Personal Reasons for Selling
• Business Reasons for Selling
• Determine the Company’s Valuation
• Determine Best Candidates
• Tax Considerations:
What Method is Best for the Seller
• Determine Best Candidates

3. Personal Reasons for Selling
• Investors Are Forcing You to Become Liquid
• Cash-in from Entrepreneur
• Disagreements
• Acceptable Unsolicited Offer
• Business - Burn Out
• Personal Event
• Poor Health

4. Business Reasons for Selling
• Requires Significant Capital for Growth
• New Competition
• Limited Opportunity
• Close to Closing
• Market Condition Forecasts

5. Determine the Company’s
Valuation
• Valuation Based on Financial Evaluation
• Strategic Marketing Value

6. Determine Best Candidates
• Strategic Buyers
– Competitors
– Related Businesses
– Manufacturers of Related Products
– Companies with Announced Acquisition Plans
• Financial Buyers
– Management - ESOP
– Related Businesses
– High Net Worth Individuals

7. Tax Considerations:
What Method is Best for the Seller
• Stock for Stock
• Cash for Stock
• Installment Transaction

8. Double Taxation
• Asset Sales - Corp. Tax + Stockholder
Tax

9. Financial Up-to-Date
• Maintain the Finances on a Consistent
Monthly P & L and Cash Flow Basis

10. Prepare 3-Year Projections
• by Month Actual Account Plus Future
Accounts
• by Actual Product Plus New Products
• by Region and/or by Store

11. Know Why You Are
Selling the Company
• Strategic Reasons
• Growth Exceeded Management Capabilities
• Diversify Net Worth
• Other Interests
• Getting Older - Illness - Divorce
• Owner Disagreements
• Investors Desire to Liquidate

12. Things to Do
While Running the Business
• Keep Term Liability Agreements Short
– Leases - 2 to 3 Years with Options to Renew
– Distributor Agreements - Short Term Cancellation
– Supplier Agreements - Cancel at Your Option or in 30 -
60 Days
• Keep Term Asset Type Agreements Longer
– Employee Non-Compete Agreements
– License and Royalty Agreements
– Sales Agreements with Price Escalation
• All Agreements Must Be Assignable

13. A Model
for Running the Business
• Develop a Prestigious Customer List
• Keep a Well-Maintained Facility
• Show a Continuous Growth in Sales and Profits
• Develop Propriety Assets
– Patents, Copyrights, Trademarks
– Process Know How: Formulations and
Documentation
• Develop a Well-Respected Sales Distribution Channel
• In General, Do Things That Others Will Value Much
Higher Than Your Cost to Create Them

14. The Actual Process of Selling
(Average Time from Beginning to Closing is Up to One Year)
• Develop a List of Candidates
– Choose a group of strategic buyers
• Try to Play the Role of a “Reluctant Suitor”
– Have Others Make Initial Contacts
– Investment Bankers - Consultants - Brokers, etc.
• Get More Than One Serious Candidate
– Use Competitive Negotiation Strategies
– Let All Candidates Know Others Are Interested
– Negotiate An Equitable Sales Price And Related Issues

15. The Actual Process of Selling
(Average Time from Beginning to Closing is Up to One Year)
• Select One Candidate
– Develop A Letter of Intent
A) All Equity Issues Described “How Much”
B) A Period of Due Diligence - 15 to 60 Days
• Negotiate a Definitive Agreement of Sale
• Closing