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PUTTING YOUR BUSINESS ON THE MARKET
A. COMPANY SALES PROSPECTUS
1. When you intend to sell a business to a potential buyer, it is necessary to write out a sales
prospectus, often called the marketing brochure or offering memorandum. This prospectus outlines
the important aspects of your company in such a way that the potential buyer sees the company as
a sound investment worth all of the money that you are asking for.
2. It is important to remember that the prospectus is a sales document in which you try to convince
the buyer to accept your asking price and actually buy your company. The prospectus should include
the following sections:-
3. An Investment Summary summarizes the investment opportunity outlined throughout the prospectus and
includes the reason for selling, the products made, items for sale, timeframe for the sale and any
general financial information.
4. General Company information should include parts as how old the company is, the number of employees,
annual sales, why the company is up for sale, general proprietary technology information, what the company
sells and who the company founders were.
5. The overall market assessment covers the relationship between the company, the market in general and its
specific market in particular. Growth trends within the market over the past couple of years should also be
made along with future market trends.
6. The sales and marketing overview details the companies products and or services mix, marketing strategies,
personnel, distribution channels as well as historical successes and future expectations.
7. The next section should concentrate on special assets processes and agreements, including any patents,
trademarks, copyrights and any special agreements such as with vendors.
8. A section on the key management personnel should include the professional and educational information of the
CEO, President, Vice-President, Directors and any other key board members.
9. In the section of past financial information it is important to include financial statements from the past
few years with comparative financial statements for the past 24 months. Details about accounting procedures such
as cash or accrual should be included here.
10. The projected future financial performance section is an extrapolation of past performance into the future.
An important note is to remember to check with your legal aids before including future forecasts that might be
construed as commitments instead of best guesstimates.
11. The ownership section outlines who owns what in the company, for how long and in what percentages.
12. The section on the asking price and financing should present your case for your asking price as well as including details
on any financing being offered.
13. The conclusion section restates what was said in the investment summary whilst saying that it is an excellent investment
which should be bought sooner rather than later before someone else gets the opportunity.
14. The final section is for appendices which should include any brochures, samples, website information and any
competition information.
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B. COMPANY VALUATION AND NEGOTIATIONS
1. The determination of the company asking price is important, as a low price could
cause your company to be sold too quickly, leaving you to be discontented, while too
high a price may discourage potential buyers. Remember that the asking price must be
based on the future worth of the company, not its past performance which took place
under the previous owners supervision.
2. When choosing the right price always remember 3 important factors, these are supply,
demand and time. You should not try to allow your own likes or dislikes cloud a true
company value and do not reduce the sale price if more time has elapsed than you initially
predicted. Start at a sale price 10% or so higher than your reasonable price value so
allowing room for negotiations.
3. When selling a company, it is important to determine the buyers motivations, the better you
do this the more effectively you can present your company in the best way to
achieve a sale.
4. It is highly likely that a buyer will want to include some stock as payment for part of
the purchase price.
5. When you are negotiating with a potential company buyer you should already have an accountant
and an attorney, or even better a CPA/M&A attorney on your side. It is important to note that if
these people have experience in negotiating, it would be wiser to allow them to negotiate on
your behalf.
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C. STOPPING THE SALE
1. If you are unable to sell a business and yet you think you were quite close to clinching a deal,
it is important that you find out why they did not buy and this feedback information will then help
you pinpoint any problems that may have been invisible to you.
2. When you have had a company on sale and decide not to sell it is wise to carry out a damage limitation
exercise with your employees, customers and any other owners. As a very minimum you need to talk to major
customers, major vendors, key employees and other investors.
3. Once you decide to take the company off the market, you should go overboard in the service areas to make sure
that you are in business to stay and that your relationship with them will remain as
positive as in the past.
4. When thinking about your employees you need to convince them that the company and you are still in business
and that their jobs are not in danger.
5.
As an alternative to selling your company to an outside buyer, it may be wise to ascertain if your employees would
be willing to purchase the company, using one of the following methods: Leveraged Buy Out (LBO), Management
Buy Out (MBO) AND employee Stock Option Plan (ESOP).
6. Soon after you have decided to take your company off the market you will begin to regret having revealed company
information to your competitors, which you would otherwise have kept secret. To compensate for this it would be
wise to make changes to your company procedures and operations and then to just forget what cannot be undone in
relation to the information you have already revealed.
7. If you decide to liquidate your company it is always wise to consult with tax and legal experts before making a
final decision as different company types have different rules governing how they can be liquidated.
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