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SELL
MY COMPANY…?
Begin the
Process –
There comes a
time when every business owner asks himself:
“Should I sell my company?”
You decision to sell can be based on several factors,
including:
-
Generational Transition
-
Differences among Owners regarding the Future of the
Business
-
New Management is Needed
-
Uncertainty about the Future of the Business
-
The Company has Grown Beyond the Capacity of Current
Owners
-
Financial Resources are Needed to Continue
-
The Company has Grown Beyond the Ability of Existing
Management Controls
-
The Business is Worth More to an Acquiring Company
than the Present Ownership
-
Retirement
Selling your
company can be a rewarding financial experience, or a process
that is very frustrating. The
information UBA can provide will help you understand the
process; and, you should rely also on your CPA for advisement.
It is important to understand the valuation process and
methodology which will be applied to your business transaction.
A realistic approach, with a clear understanding of the
potential financial gain, as well as related tax consequences,
will help you judge the sale of your business, and the timing of
such a sale.
Let
UBA be of assistance in this process.
Preparing
the Company for its Sale.
Plans
to sell your company should be made well in advance of the
actual sale. This, among other things, will permit you the time to adjust
accounting practices, perhaps conduct an audit of the company,
and establish a three- to five-year track record of maximum
profitability. You
want to sell your business at its peak.
Nearly
every privately held company is operated in a manner that
minimizes tax liability. HOWEVER,
prospective buyers do not pay for the creative methods you are
using to lower your taxes.
They pay for profitability, cash flow, earnings and
assets. As such,
the same operating techniques and accounting practices that
minimize your tax liability, also minimize the value
of your company.
Audited
statements are the best financial statements in the sale of a
business. They are
verifiable and will almost always produce a higher price and
less onerous “representations & warranties” section.
In
determining the value of your company, a valuation report should
be obtained. While
any buyer is ultimately going to place the “value” on the
company, a valuation is a “back pocket” item for you.
It can eliminate any guesswork and the painful trial and
error method of pricing. Regardless
of how strong you are in the operation of your company, you may
not know its fair market value.
And, the value of your company is NOT what you need to
retire on…!!! Nor
is it simply based on plant and equipment cost – these are
assets which comprise only a fraction of your company’s total
worth.
A
professional intermediary, in addition to your CPA, is
recommended by most. That
is the role UBA can serve.
The intermediary can assist in organizing the information
required by buyers; and, can manage the process – keeping it
on-track – so no time is lost.
SELL
YOUR COMPANY CHECK-LIST:
The
following is a list of information compiled by UBA which should
assist in you in preparing for the sale of your business.
This is information you will need to pass along to your
CPA and/or UBA for review by prospective buyers – this will be
in follow-up to the Profile you have listed on our pages.
The process will be easier, and FASTER if you are well
prepared. Work to
compile the following:
General
Information
Reasons for selling the
business
How long has the business been for sale?
Have there been prior attempts to sell?
With whom? ·
What is the asking price? Terms? Is
seller financing available?
Background and History
Legal name
State of Incorporation; date incorporated
Form of business (sole proprietorship, partnership, etc.)
Minutes of Board of Directors meetings, Articles of
Incorporation, Bylaws
Founders and History
Any Acquisitions, Mergers or Divestitures?
List of Subsidiaries, Divisions, and Joint Ventures
Market
Definition of Market in which Business Operates
Current Market Share
Market Trends
Major Competitors
Products and Services
Sales/Profitability of Product Lines
Competitive Strengths and Weaknesses
People
Owners – percentage of ownership
Officers, Directors, Managers, etc.
Any Special Skills?
Total Number of Employees
Union or Non-Union Shop?
Facilities
Location and Plat Facilities
Age and Condition of Facilities
Utilization/Capacity Rates
Lease or Own?
Environmental Studies, etc.
Operations
Production Process
Major Suppliers
Major Customers & Percentage of Total Sales
Order Backlog
Method of Inventory Control
Research and Development Activities
Method of Pricing Products
Capital Expenditures – Historical & Planned
Financial
Audited Financial Statements
Three Years of Financials
Budget & Cash Flow information for Current Year
Financial Projections for the Next Five Years
Unusual/Non-Recurring Expenses/Income
Description of Internal Controls
Capitalization and List of Shareholders
Outstanding Debt
Intellectual Property
Insurance Coverage
Retiree Pension and Medical Liabilities
Other
Names/Addresses of Professional Advisors
History & Result of any Lawsuit(s) brought Against
the Company
Contracts
WHAT’S
MY BUSINESS WORTH?
A thorough
Business Valuation can be a real eye-opener!
And, it is generally recommended if you are selling your
business. From a
buyer’s perspective, it is a must.
And,
just like a resume, a business valuation should be an on-going
process – you should work to periodically “measure” your
company’s worth and value.
It can really help you, even without a pending sale.
Consider the following:
-
become aware of the factors that account for your
business’s worth – you’ll want to intentionally cultivate
your company’s value over time
-
view your firm as a prospective buyer would, and gain a
better picture of its strengths and weaknesses
-
prepare a better estate plan – business owners can
avoid overpaying gift & estate taxes by having a
well-documented valuation study
-
provide the necessary documentation to support your
deduction for contributions to an employee stock-ownership plan
-
obtain a loan by showing that the company is worth more
than the value shown on its balance sheet
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