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Variety
of Personal and Business Circumstances Can Trigger the Decision to
Sell
The decision to sell a business is often difficult
due to the potentially profound personal and financial impact of such
a transaction. Many different influences bring business owners to
this decision, including:
| • |
Worrisome exposure to business risks
often aggravated by personal guarantee on loans |
| • |
Possible failure of the business if one or more
owners become seriously ill or disabled |
| • |
Owner’s desire to pursue other business
interests which may be more challenging or less stressful |
| • |
Differences among multiple owners about the future
direction of the business |
| • |
A need within the company for new skills, new
resources or a new philosophy to cope with ever-changing economic
forces, government regulations or competition |
| • |
Company has grown beyond the capacity of owners
to obtain financial resources or to effectively manage |
| • |
The business is worth more to an acquiring company
than to the present ownership |
| • |
Generational transition or personal preference
of the owners to retire |
What is the Business Worth?
A business is ultimately worth what a qualified buyer is willing to
pay. Buyers are mainly concerned with obtaining a fair return on their
investment (ROI), while also applying judgments about market position,
proprietary know-how and intellectual property, competitive strengths,
quality of the assets and earnings, growth potential and risks associated
with the business.
Seller Self Assessment
The seller must be able to demonstrate that the new owner will be
able to adequately compensate management and employees, service the
debt, receive a return on investment and generate a profit. The C&H
Group will facilitate the preparation of required information with
the assistance of the business owner, who should provide the following
data:
| General: |
Reasons for selling
Length of time the business has been for sale
Predetermined selling price and term |
| |
|
| Background/History: |
Legal name and incorporation (state, date)
Form of business
Articles of incorporation, bylaws, board of directors
Founders and history
Acquisitions, mergers, divestitures, joint ventures |
| |
|
| Market: |
Market definition and current market share
Market trends and major competitors
Sales and profitability of major products/services
Competitive strengths and weaknesses
Channels of distribution |
| |
|
| People: |
Owners and percentages of ownership
Officers, managers, and key employees (position, experience)
Total employment and skill sets (union or nonunion) |
| |
|
| Facilities: |
Location and plant facilities (age and condition,
leased or owned)
Utilization and capacity rates
Environmental studies |
| |
|
| Operations: |
Production processes
Major suppliers
Major customers and percentage of total sales
Method of inventory control and order backlog
Research and development activities
Pricing methodology
Capital expenditures (historical and planned) |
| |
|
| Financial/Legal: |
Audited financial statements for past three years
and current monthly financials
Budget and cash flow statements for current year
Financial projections for next five years
Unusual/nonrecurring expenses and/or income
Description of internal controls
Capitalization and list of shareholders
Outstanding debt
Intellectual property (patents, trademarks)
Insurance coverage, retiree pension and medical liabilities
Names and contacts of professional advisors
History of any legal action brought against the company
Contract
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