Marketing Your Business for Sale to Qualified Buyers
Mitch Biggs is a Featured Business and Finance Contributor on Associated Content. This is a reprint of a previously published article.
Marketing a business to sell has a healthy mix of art and science. Before we discuss marketing your business, let us be clear that you have paid a professional for a business valuation. All too often, business owners find themselves stepping over dollars to pick up pennies. If you value your business then Value Your Business!
Once you are confident you have the price established for your business, the marketing plan is the most important step to attract qualified buyers. The backbone of the marketing plan is the marketing book. If you are working with a business broker, ask to see an example of a marketing book they plan to use. Most professional business brokers will have marketing books that have been authorized by previous clients to be shown. If all they can produce is a manila folder with some spreadsheets and a few pictures, then you may be in for a tenuous relationship with the business broker.
Some brokers use the term Confidential Memorandum in lieu of Marketing Book or use the terms interchangeably. First and foremost the Marketing Book (Confidential Memorandum) should be easy to read and logical flow. The purpose of the marketing book is to provide a serious buyer all the information they need to make a decision to move forward with the business acquisition process or pass on the opportunity.
Here are some recommended sections for marketing books.
1. Industry Research from recognized sources such as IBIS World
2. Pictures of the business, completed work /projects/products and key employees
3. Organization Chart
4. Employee Job descriptions and compensation rates
5. Buyer’s Opportunity Summary Information Page
6. Descriptive information related to the business, products, competition and customer base
7. Quality of life information for the community or city the business is located and conducts business, especially the headquarters location and where most employees live
8. Past three years financial results including revenue, earnings before taxes, Seller’s Discretionary Cash Flow as a minimum
9. Assets included and excluded from the sale. Liabilities included and excluded from the sale.
10. Recommendations for new owner and 3 year projections.
All qualified buyers should receive a hard copy of the marketing book. Avoid email when possible due to the risk of breaching confidentiality. It is much easier to control access to one marketing book compared to an email that could be sent to multiple people unintentionally. The marketing book is a confidential document and should be returned if the buyer decides against acquiring the business.
Finally, make sure the marketing book is updated quarterly with interim financial statements. Businesses do not sell overnight and it is very important to both the buyer and seller to keep the numbers recent. Be prepared to explain any significant deviations from current year plan in key line items.