Selling My Business

• Can I sell my business?
• How do I know if my business is worth buying?
• Who would want to Buy my business?
• What are the main risks when I sell my business?
• How will I present my business to potential Buyers?
• What is my business worth?
• Where can I get experienced help selling my business?
• and many more...

Where to sell my business

Which method of selling your business is of most value to you?

1. Selling my Business to family: Statistically 75% failure rate for second generation owners. When selling your business to your family you have to consider the consequences of payments over a longer period of time and potential risks of the loss of the business before your fully paid out. It is critical you work through the process of coming to agreement on what your roll will be after you all sign off on the deal, and how you exit the day to day operations of the business. This has to include risk mitigation issues like your name coming off guarantees, security agreements etc.. MAXIMA has a proven effective process to work with all parties to establish a formal “fit for purpose” sale of business model to complete the sale.
2. Selling my Business to employees - Management buyouts: While many times existing personnel are interested in taking over and buying the business, the challenges start with the Buyer looking for a "good guy" discount; “after all I have work here and helped you make this business what it is so I should get a discount”. Another key concern when selling your business to your employees is the process of determining where does the funding to buy you out come from. How will the employees come up with the funding and the collateral for the deal? This typically includes determining how much vendor financing will you carry for some future payout. This again carries RISK with the process. You as the business owner need to have the ability to protect your investment if the business starts to wander from the course you have built. Management buy outs definitely can work, however both sides need to be well prepared for the challenges and time frames to complete the process.
3. Selling my Business to a Competitor: Many Business Brokers feel this is the easiest solution. The truth is Selling your business to a Competitor is full of dangers to you and has almost no consequences to the Competitor. The challenge is before they say “yes here is the cheque”, you have to show them everything about what you do and how you do it. Many people underestimate the RISK associated with this solution for selling your business. By the end of the Due Diligence process that Competitor will know your clients, your staff, your profit margins, your “secret herbs and spices”, your future upside, and still have the ability to walk from the deal. This all spells MAJOR RISK. When selling your business to a competitor you must find deliberate ways to reduce that risk. MAXIMA has worked through this process a number of times and has developed proven processes to reduce that risk by keeping the playing field level.
4. Selling your Business to an outside Buyer: While an outside Buyer may be the most challenging to find, they are most likely to pay fair market price (or higher) when buying your business. An outside Buyer knows they have to provide a clear model to have you paid out in the appropriate period of time. The typical outside Buyer knows the only good deal is a fair deal. The process of finding the right outside Buyer can seem like an overwhelming task. MAXIMA has developed proved strategies to find and qualify Buyers, including international Buyers. Typically this model for selling a business has the lowest RISK to you.

Seller verses Buyer

Every situation has two sides. What is the difference between the Seller and the Buyer?

It’s this simple:

Seller’s priority: To get the best deal possible (highest price with fastest payout).

Buyer’s priority: To get the best deal possible (lowest price with longest payout).

MAXIMA’s goals for Selling your Business:

#1 Goal: We are your Champion through the process of successfully selling your business in a timely and effective professional manner.

#2 Goal: To make best use of proven “Best Practice” processes and strategies to successfully sell your business.

#3 Goal: At MAXIMA we operate with highest level of integrity in all our Client and Marketplace interactions.

MAXIMA will only represent one side of any deal!

MAXIMA will act on the SELLERS behalf or the BUYERS behalf; but never both. At MAXIMA we manage the process of selling your business so you can focus on running your business.

We do this through a strategic process developed since 2002 which includes:

1. Taking the time to develop an understanding of what your business actually has to do to get the job done.
2. Assembling a well researched and professional Corporate Profile on your business demonstrating its full value and future earnings potential.
3. Assisting you through processing and completion of the multilevels of financial, historical, and corporate documents required to complete a sale of business transaction.
4. Working through the Business Valuations process to establish a defendable range of current fair market value.
5. Identifying the profile of the perfect Buyer and what that might look like.
6. Consistently working with you to maintain the maximum CONFIDENTIALITY possible.
7. Acting as Gatekeeper to keep the “tire kickers” and unqualified Buyers from consuming your times and resources.
8. Researching the marketplace to identify Buyers that fit that profile.
9. Developing the script designed to protect your confidentiality, measure potential interest in buying your business, and confirming the target is a qualified Buyer.
10. MAXIMA then literally contacts them directly; not by blanket emails or spam mail, but personally.
11. We assist you with negotiations and structuring of the sale of your business to maximize the overall benefit to you, the owner from the transaction.
12. MAXIMA then works with you, your accounting adviser, tax adviser, and lawyer to complete the paperwork and documentation required to complete the deal.

While you are considering selling your business, you will also need to include the priorities and considerations for the main “types” of Buyers for your business:

1. Private Buyers
2. Corporate Buyers
3. Fund Buyers
4. Competitors

Strategic considerations when selling my business to a Private Buyer

1. Private Buyers are typically less experienced in the process so will tend to work in a series of steps rather than a process. This leads to significantly longer deal times.
2. Private Buyers typically sit in two camps: one is where the private Buyer is looking for a company with a long history of profitability and low risk. The other is where the private Buyer is looking for a good company which is financially challenged. The private Buyer feels they know how to make the changes to make the business profitable once they negotiate a substantially discounted price.
3. Longer deal times means you may be bound by a “no shop” clause while your waiting which can keep your business off the market.
4. Private Buyers tend to look for larger portions of Vendor Carried Financing.
5. Private Buyers may not fully understand your business model and business operations which will lead to a more hands on roll for you as you train them in the business. That extra time needs to be factored into the deal structure early in process to avoid miss-understandings later in the deal cycle.
6. Non sophisticated private Buyers tend to try to negotiate down the price throughout the deal cycle, and particularly in Due Diligence cycle. This process must be managed throughout selling your business to keep the deal you end up with similar to the deal you started with in the Letter of Intent.
7. Importantly, some private Buyers are simply looking to build a fair and reasonable deal where all the stakeholders win. This process should be managed in a way that addresses the priority of all parties.

Strategic considerations when selling my business to a Corporate Buyer

1. Corporate Buyers tend to be very good at buying a business. They know what they are looking for, what their mandate includes, and ways and means to structure the best deal for their corporation. This will include buying your business for the lowest purchase price.
2. Some Buyers earn bonuses based on the gap between fair market value and what they manage to negotiate. You need to know what your business is worth when selling the business.
3. On other hand some Corporate Buyers make it a point to review as many businesses for sale as they can. This provides them with a first hand view of what is going on in the marketplace with no risk to them. This can consume a lot of time, energy and resources for you. Qualifying the Buyers goals are a critical part of the process of selling your business.
4. Corporate Buyers are also the Buyers who have the ability to pay top dollar for a business which specifically meets their corporate mandate. This means the right Corporate Buyer will pay a premium for a company that achieves his goal. You need to learn what that goal is as early in the process of selling your business to a Corporate Buyer as possible.
5. Corporate Buyers also have many transaction models. For example: some Corporate Buyers want to merge your business into their clients business. Some Corporate Buyers want to own control and start adding other products and services into your business. Or perhaps the Corporate Buyer is looking for a struggling company to roll into another operation or cut up and flip. Any strategy may be appropriate however you need to understand the Corporate Buyers goal as you negotiate your deal structure.
6. Whatever the strategy of the Corporate Buyer, you need to develop a sense of what that strategy is as early in your negotiation process as possible.

Strategic considerations when selling my business to a Fund (i.e.: equity fund)

1. Funds typically have expert Buyers who are looking for the best deal built around what works out best for the fund.
2. Funds typically have ability to pay more cash down on closing.
3. Funds are usually very solid financially and tend to complete valuations in the higher range of the valuation scale.
4. When a Fund is buying your business the Fund is buying “return on investment” not risk. This typically means the business model going forward has the least amount of changes from the historically proven model. They look for clients to stay on, staff to stay on, and in many cases negotiate longer term work out agreements with the business owners.
5. Funds will apply sophisticated analytical models to your business which is more likely to find reasons not to compete the deal rather than confirm your business for sale is the one to buy. For example: one fund group from Vancouver looked at over 200 companies before completing a purchase.
6. Most funds operate under a larger amount of fiduciary responsibility and are highly accountable to their shareholders. This means the paperwork, financials, inventories, and general documentation throughout the process will pass through many levels of scrutiny.
7. Successfully selling your business to a Fund requires considerable planning, preparation, consistent negotiations, time, and resources.

Strategic considerations when selling my business to a Competitor

1. Your Competitor operates in the same marketplace you do. They know the culture, the currents, the challenges, and the opportunities. Any sale they don't get, you are another competitor do get. As a competitor you literally make them work for all their marketplace goals. While anyone would initially think of a Competitor as the perfect buyer for your business, there are many good reasons why they are the Buyer of last resort. Last project you bid you were competing head to head, and now your going to open up your business for their full inspection hoping to get a fair offer to get you out of their marketplace.
2. No Confidentially Agreement will keep your competitor from telling someone your considering selling. If they tell their key staff, it is only a matter of time before they tell someone else. If they tell their Board it is only a matter of time before they tell someone else. If they tell the funders it is only a matter of time before they tell some one else. This is not a risk to them, it is a risk for you.
3. Over the years MAXIMA has seen the following challenges come up when the process of selling your business to a competitor is not properly managed:
4. Suddenly your key employee gets an offer to work somewhere else. Because that employee was shocked to hear (from the competitor) you were selling the business, now he has to wonder what the new owners will be like and he takes the job he would not have considered before.
5. With that key employee exiting to your competition there goes the knowledge base your business has be developing for years. Suddenly that strategic plan you had been developing is no longer a surprise and your advantage of “first to market” is gone.
6. That big project you were bidding on suddenly starts stonewalling you. You check into why and find out they are aware your selling and they want to work with someone they know, and they don't know who will buy your business.
7. That cornerstone client you have been servicing for years suddenly gives notice. They explain their relationship is with you, not the pending new owners of the business. Once your gone, they will go out to someone who has been chasing them for years...
8. We have even seen a competitor advise the Vendors bank they were potentially selling the business. The banker had not been advised of this and proceeded to cut their credit line.
9. On the other hand, your competitor might be the perfect Buyer. How can you find out the interest without revealing your hand? And then how do you have that competitor somehow share the risk? Good question, ask us.

CRITICAL CONSIDERATION when selling a business: Do not “take your eye off the ball”. If your business activity levels decline while working through the process of selling your business, the value or your end deal WILL BE EFFECTED!

Your priority is “ steady as she goes”. Seriously consider paying someone to act as your Champion and spend the hundreds of hours involved in selling your business. This allows you to do what you do best... and your Champion to do what they do best...!