Steps Selling Business | Orange County Business Broker
phone.949-200-6350

Seller Transaction Process Stages

Initial Meeting, Valuation, Representation Agreement, and Preparation Stages

Initial Meeting

Initial meeting; answer your questi

Show More

Recast Financials, Market Value Determination

The next step is to recast your fin

Show More

2nd Meeting Review Market Value

2nd meeting; review company Discret

Show More

Representation Agreement

If the recommended Market Value is

Show More

Marketing Package

We prepare the marketing package fo

Show More

Launch Business for Sale Website Ads

Now we are ready to start advertisi

Show More

Buyer Inquiries, Offer, Negotiations, and Closing Stages

Buyer Inquiries

At this stage we are fielding in

Show More

Confidentiality Agreement (NDA), Qualification, Vetting Buyers

When a prospective buyer appears

Show More

Buyer-Seller Meetings

The Buyer-Seller meeting is the

Show More

Prepare & Present Offer

We meet with the the Buyer and p

Show More

Negotiations & Deal Structure

Offers are seldom accepted on th

Show More

Due Diligence

This along with the offer and ne

Show More

Escrow Opened

After Due Diligence is complete and

Show More

SBA Financing, Lease, etc

The SBA approval process takes a mi

Show More

Closing

The Close of Escrow and Change of P

Show More

Training

Most purchase agreements include 30

Show More

Steps in Selling a Business

Our 15 step transaction process is outlined below.

  1. Initial Meeting, Seller and Business Broker:
    The purpose of the our first meeting is  to answer your questions, learn more  about  your business and your goals. Our initial meeting can be in person or in some cases via phone.
  2. Recast Financial Statements & Market Value Report:
    The next step is to recast your financial statements to determine the market value of your business. We start with your last 3 years of Federal Tax Returns and P&Ls along with the current Year to Date P&L. From this we calculate the Discretionary Earnings (DE) of the business. DE is the total economic benefit the owner derives from the business. We calculate it starting with the Net Profit shown on the Tax Return and then adding back all owner benefits and non-business related expenses, plus depreciation, amortization, taxes and Interest. (EBITDA).We use DE to calculate the market value with our business valuation program which uses both comparable sales (comps) data for similar businesses and the income valuation method (discounted cash flow) method. In some cases we may recommend a Third Party Business Valuation or formal valuation.
  3. Review Financials & Market Value with Seller:
    In our second meeting we review the Market Value Report, Discretionary Earnings for the company, and Comps (Comparable Sales). We also discuss marketing for the business and answer any additional questions you have about the prospective sale of your business.
  4. Representation Agreement:
    If the recommended asking price in our Market Value Report is acceptable we execute a Representation Agreement for our firm to represent you as your Business Broker in the sale of your business. We use the CABB (California Association of Business Brokers) Representation Agreement and CABB forms for all of our transaction documents including the Purchase Offer and NDA (Non Disclosure Agreements for Buyers).
  5. Marketing Package:
    The marketing package for your business includes our Confidential Business Profile and ad copy for our internet advertising. The Confidential Business Profile is very comprehensive and for larger businesses is often between 20 and 30 pages with a business overview, product or service information, complete financial statements, pictures of the business, equipment list, and staff information (no names or details).The Confidential Business Profile is only sent to prospective buyers after they have signed our Confidentiality Agreement and provided a Buyer Profile with information about their financial position.
  6. Launch Business for Sale Websites:
    We post the ad for your business on the major national business for sale websites and send email blasts to buyers interested in your industry. We also maintain an internal list of interested buyers in our CRM system.
    The ads we run are “blind” ads that describe the business in broad terms such as “Orange County Manufacturing Business”, or “Orange County Medical Products Distributor”, etc. Our ads do not have specific location or product details that would divulge the name or identity of the company for sale.
  7. Buyer Inquiries:
    One of our most frequent questions from Seller’s is how do you find buyers? We actually receive lots of buyer inquires, getting inquiries is not the challenge. The challenge is finding the “right” buyer and a capable buyer. We often have 50 to 100 inquiries before we sell a business, many of these being either not qualified or the business is not quite right for them.When a prospective buyer inquires about a business from one of our ads we send them our Confidentiality Agreement (NDA) and Buyer Profile. The Buyer Profile asks about their background, financial position, credit score, etc so we can determine if they are a qualified prospect.
  8. Confidentiality Agreement (NDA), Buyer Profile and Vetting Buyers:
    We review each NDA and Buyer Profile paying particular attention to the Buyer’s financial position, experience and qualifications. Buyers that are not financially or otherwise qualified do not receive a copy of the Confidential Business Profile.We contact Buyers that have received the Confidential Business Profile after they have had time to review the profile, answer their questions about the business and learn more about their experience and goals.
  9. Buyer-Seller Meetings:
    When a prospective buyer appears to be a qualified prospect and has signed the NDA we send them the Confidential Business Profile. Many of our inquiries are casual interest and never return the Confidentiality Agreement and Buyer Profile. Likewise, some of prospective buyers that return the NDA and Buyer Profile are not qualified to purchase the business, in which case we inform them that they are not qualified (generally as a result of cash position, sometimes experience) for this particular business.
  10. Prepare & Present Offer:
    We meet with the the Buyer and prepare the offer on the CABB Asset Purchase Agreement or Stock Purchase Agreement along with any addendums for additional terms and conditions. When the offer is complete and signed we collect an Earnest Money Deposit check made out to the Escrow company from the Buyer which is held uncashed until Due Diligence is complete and signed off and Escrow is opened.We present the offer to you and review it in detail explaining the offer, the Buyer’s thinking and rationale behind the offer.
  11. Negotiations & Deal Structure:
    Offers are seldom accepted as is even if they are excellent. Price is the most common negotiating point and frequently terms need to be refined or clarified.We facilitate the negotiations, prepare the Counter Offers and Amendments to reach a mutually acceptable offer. When the Offer and Counter Offers have been signed by all parties we have a Contingent Purchase Agreement and begin Due Diligence.
  12. Due Diligence:
    This along with the offer and negotiations is one of the most critical steps in selling your business. Due Diligence is a Contingency for both Buyer and Seller and a critical milestone.During Due Diligence the Buyer verifies the revenue, expenses, earnings and financial wherewithal of the business that has been presented to them.There is also Seller Due Diligence where you the Seller reviews the qualifications, financial position, and overall capabilities of the Buyer.At the conclusion of Due Diligence Buyer and Seller remove the Due Diligence Contingency and Escrow is opened. If either party is unsatisfied with their Due Diligence then there are three options 1) resolve the issues or questions that arose during Due Diligence, 2) return the Buyer’s Earnest Money Deposit as specified in the Purchase Agreement, or 3) renegotiate the Purchase Agreement based on the new findings or facts.
  13. Escrow Opened:
    After Due Diligence is complete and both Buyer and Seller have removed this contingency Escrow is ready to be opened. Note that other contingencies such as bank financing and lease contingency will still be open.Escrow will draft the Escrow instructions, cash the Buyer Deposit Check and open Escrow once the instructions are signed by all parties.During Escrow the Escrow Officer will run lien searches, publish the notice to creditors, obtain releases from tax authorities including Franchise Tax Board, Board of Equalization, EDD, etc. The Escrow Officer will send information requests to Buyer and Seller during Escrow and documents for signature.
  14. SBA Financing, Lease, etc.:
    The SBA approval process takes a minimum of 45 days if Buyer and Seller promptly send all requested information to the bank, frequently SBA loans can take 60 days from the time of submission. Consequently, in some cases we start the SBA approval process before Escrow is opened. The SBA lender (bank) will require information from both Buyer and Seller in order to approve the loan. This will include 3 years of financial statements and tax returns from Buyer and Seller, personal financial statement and resume from Buyer, and other information.A new or assigned lease in the name of the buyer is required prior to the Close of Escrow. We recommend introducing the Buyer to the Landlord as early in the process as possible onces Escrow is opened to give the Landlord adequate time to review the Buyer’s application and prepare a new lease or assignment of lease. Note that if an SBA loan is involved the bank may require a 10 year lease including options. In some cases this can be waived if the location is not critical or unique to the business.
  15. Closing:
    The Close of Escrow and Change of Possession (COP) occurs when Escrow has completed the lien searches, notice to creditors, obtained releases from tax authorities including Franchise Tax Board, Board of Equalization, EDD, and when bank funding is ready (if third party financing is being used). The new or assigned Lease must be ready prior to close of escrow.
  16. Training:
    Most purchase agreements include 30 days of training by the Seller included with the purchase price of the business. In some cases this may be longer, rarely is it shorter as the Buyer needs sufficient time to learn the business.In instances where the business is complex such as construction contractors, manufacturing, technical businesses, etc a longer training period may be required. In these cases a consulting agreement is often negotiated where the Seller agrees to stay as a consultant for a specified period of time with mutually agreed compensation.