Selling a Business

You've decided to sell your Los Angeles business. There are some things you should know about how your business broker in Los Angeles gets it done.

John Schmid and Summit Business Brokers want you to go into the process of selling your business with eyes wide open. Here’s a quick checklist of the sales process as performed by a good business broker in Los Angeles:

Step 1: Valuing Your Business - After you and your business broker in Los Angeles sign a Confidentiality Agreement, you provide the broker with three years of financial statements, tax returns and a year-to-date operating statement.  You may also be asked for such information as a lease summary, a list of significant assets, and a description of key employees. 

From this information, the business broker comes up with a Most Probable Selling Price (“MPSP”) - the range your Los Angeles business will likely sell for in today’s market. If the MPSP meets your financial goals, you proceed.  If not, then you can stop the process here, or wait until the company’s profitability improves, or market conditions change. 

Step 2:  The Representation Agreement - If the MPSP range is acceptable, a Representation Agreement is signed, naming the business broker as the exclusive marketing agent for your Los Angeles business, and stating the offering price and terms.  The Agreement also stipulates the commission to be paid upon successful closing.

Step 3:  Developing & Approving a Marketing Plan – In putting together a marketing strategy, your business broker employs such time-honored, effective marketing tools as online advertising on key websites, letters and calls to known Los Angeles buyers, and selective mailing and phone calls to potential buyers. Once you okay the plan, your business broker in Los Angeles can really go to work on your behalf.

Step 4:  Finding the Right Buyer.  A good business broker finds Los Angeles buyers in three ways:  Known buyers who have already signed Confidentiality Agreements and have expressed a desire to buy a business; Internet Buyers who respond to listings posted online; and Strategic Buyers who are approached discretely, with the seller’s permission.

(Note: Confidentiality is paramount at all times. The name of your business, its location and key facts that might allow it to be identified are always excluded from marketing materials, in order to keep everything confidential until closing. Significant value can be destroyed if it is commonly known that the business is on the market.  Confidentiality Agreements signed by potential buyers are required before a good business broker in Los Angeles discloses any information about the seller. Everything possible is done to prevent employees, customers, suppliers, competitors and landlords from becoming aware the business is for sale.)

Step 5:  Presenting Offers to the Seller:  All offers submitted to the seller are in writing and contain the price, terms and conditions, and proof of funds to close the transaction.  The seller may accept, reject or counter the offer.  The business broker’s role is to ensure that all communications between the Los Angeles buyer and seller are clear and understood.

Step 6:  Due Diligence Period:  Once the seller accepts an offer, the buyer has a short period to examine the company’s financial records and other relevant information. If all goes as planned, the buyer signs a statement removing all conditions (with the possible exception of their party financing), and the transaction proceeds towards closing.  Also, during the Due Diligence Period, the seller has the opportunity to verify the buyer’s creditworthiness and business experience.

Step 7:  Closing and Beyond. When a buyer has been found, the business broker in Los Angeles negotiates the best price and terms, then guides the transaction through closing, a complex process which may involve escrow, bank and seller financing documentation, dealings with attorneys for each side, business transaction issues, final valuation of inventory and accounts receivable.

John Schmid knows the business broker process in Los Angeles inside and out. With his vast expertise, deep resources and caring personal service, you can feel confident that the sale of your business is in the most capable hands.

A memo to Sellers

When it comes to successfully selling your business, planning ahead is vital. Here are some things to think about in the time before you employ a business broker to list your Los Angeles business:

• Make Your Business as Profitable as Possible – Sounds obvious, but no matter how or why you run your company, or why you are planning to sell, you have to make a potential buyer feel that that your business will make money when they’re in control.
  
  
• Keep Good Books – Initially, a business broker in Los Angeles can best present your business with clear, accurate financial statements. Staying on top of your accounting makes your business more attractive.
  
  
• Record All Cash Transactions – Once again, accurate records increase business value. So taking cash out of a business without keeping records, even if it might lessen your tax burden, will also lessen the value of your business when it’s time to sell.
  
  
• Don’t Make Yourself Indispensable – Any business broker in Los Angeles will tell you that potential buyers are skeptical of companies whose CEO is also the CFO, chief salesman, chief accountant, chief bottle washer…you get the idea. Cultivate a secondary level of excellent employees who can continue to run the company and make it grow, so the company doesn’t lose its value when it loses its founder.