WHAT A CHECKLIST LOOKS LIKE FOR SELLING YOUR BUSINESS
Without proper direction, selling a business can quickly become overwhelming and chaotic. Organizing the process into concrete tasks will help keep priorities in order and ensure that important things don’t fall through the cracks.
Selling a Business Checklist:
Find the following professionals to advise and assist you in the process of selling your business. As you progress through the checklist, the need for these professionals will become increasingly clear.
- Accountant (an expert in taxes and financial details)
- Attorney (a legal expert)
- BPC covers specifics about what you should do.
It is critical that you maintain confidentiality throughout the selling process. Even the best-intentioned people can inadvertently compromise your sale. If word spreads that you are selling your business, it can raise concerns among your employees and your customers regarding the future of the business, even if the concerns are completely unfounded.
In order to preserve the stability of your company and the integrity of your selling process, confidentiality must be a top priority until the close of your sale. Only share this information with a very select few people within the protection of a business sale confidentiality agreement.
Employ the assistance of your CPA as needed, and gather the following paperwork:
- Federal Tax Returns for the last 3 years
- Last 3 years Profit and Loss Statement (P&L) including balance sheet
- Interim P&L including balance sheet
- Average value of inventory of saleable product on hand at any time of year
- Equipment List
- Copy of tax bill on real estate if the real estate may be included in the sale
- Copy of any real estate appraisal that is available
- Lease information
Ensure that any overdue maintenance or upkeep of facilities and equipment has been completed. Your business’s “curb appeal” will affect a prospective buyer’s perception of your business’s value, which will ultimately affect the price it will bring — for better or worse.
Have a professional conduct a business valuation so you know what the range of value should be for your company. Remember that your business is worth what someone is willing to pay for it. Most values are determined by weighted averages of EBITDA, Cash Flow, or Revenue.
With all of the factors involved, it is nearly impossible to accurately determine the value of your own business, so look to your advisor for assistance. This step is also a good time for a pre-screening with a lender to ensure your company meets current lending guidelines.
Marketing is an essential step in selling a business, and maintaining confidentiality throughout the marketing process is critical. Understand how and where your business will be marketed, and help your BPC advisor by providing some key strategic targets to engage with or to avoid. Be involved with the creation of the business profile that will show off your business. No one knows your business better than you.
Make sure that the marketing material protects your confidentiality and identity of your business. Marketing materials should not have any information that has simply been copied and pasted from your website or company marketing material.
Once inquiries begin arriving, BPC will help save you time and energy by pre-screening buyers to ensure they are not only serious but also financially capable of purchasing your business.
Working with BPC also continues to protect your confidentiality at this point in the process. For example, BPC insists that prospective buyers sign NDAs or confidentiality agreements, then meet with them face-to-face (if local) to educate them on the buying process. (BPC also present prospective buyers to you for your approval before we release any sensitive information to them, such as your business’s name.)
Once you have identified a serious prospective buyer, meet with the buyer together with your/advisor. This meeting is a chance for you to get to know the prospective buyer, to explain your business, and for the buyer to ask any questions they may have.
Typically, the discussion at this meeting is related to strategy, company history, nature of the business, and other high-level topics. (Fact-checking and reviewing smaller details are typically handled during the due diligence step, post-offer.)
A formal offer to buy your business is presented as an “Offer for Purchase” or “Letter of Intent” (LOI). This document outlines the details of the offer, including the offered purchase price, the payment terms, the training and transition period, any required employment or non-compete terms for you (the Seller) and potentially key employees, and any other conditions related to the offer.
After reviewing the details, you may accept the offer, reject it, or negotiate any aspects of the offer. Remember to negotiate more than price. Do not get hyper focused on the purchase price alone; price is one part of the big picture. Understand your tax liabilities, seller notes, hold-backs, earn-outs, non-competes and consulting agreements.
Only after an offer is agreed upon will you proceed to the final steps to selling a business.
The time between an accepted offer from the buyer and the official closing is when the buyer performs their due diligence. The objective during the due diligence period is to confirm that the business was accurately represented to the buyer prior to issuing their offer letter. Most buyers are looking only for material differences or surprises that were previously unknown to them, not minor discrepancies.
Clean books and records make this process significantly easier. Have the following information readily available to help the process along:
- Financial Reports
- Employee Records and Manuals
- Sales and Marketing Material
- Business Processes
- Insurance Policies
- Benefit Package Policies
- Vendor and Supplier Agreements
When due diligence and buyer financing arrangements are complete, it is time to draft the closing documents and complete the sale. Now is the time to trust your attorneys and accountants to help you with the various legal documents and to ensure you minimize the tax impact of the sale.
Ensure that you collect your funds and have all of the documentation you need when you leave the closing table.
From our decades of experience in buying and selling businesses in a wide range of industries, BPC is positioned to guide you through the selling process from start to finish. If you are thinking about selling your business, contact BPC today for a confidential, no-obligation consultation.
Find the following professionals to advise and assist you in the process of selling your business. As you progress through the checklist, the need for these professionals will become increasingly clear.
- Accountant (an expert in taxes and financial details)
- Attorney (a legal expert)
- BPC covers specifics about what you should do.
It is critical that you maintain confidentiality throughout the selling process. Even the best-intentioned people can inadvertently compromise your sale. If word spreads that you are selling your business, it can raise concerns among your employees and your customers regarding the future of the business, even if the concerns are completely unfounded.
In order to preserve the stability of your company and the integrity of your selling process, confidentiality must be a top priority until the close of your sale. Only share this information with a very select few people within the protection of a business sale confidentiality agreement.
Employ the assistance of your CPA as needed, and gather the following paperwork:
- Federal Tax Returns for the last 3 years
- Last 3 years Profit and Loss Statement (P&L) including balance sheet
- Interim P&L including balance sheet
- Average value of inventory of saleable product on hand at any time of year
- Equipment List
- Copy of tax bill on real estate if the real estate may be included in the sale
- Copy of any real estate appraisal that is available
- Lease information
Ensure that any overdue maintenance or upkeep of facilities and equipment has been completed. Your business’s “curb appeal” will affect a prospective buyer’s perception of your business’s value, which will ultimately affect the price it will bring — for better or worse.
Have a professional conduct a business valuation so you know what the range of value should be for your company. Remember that your business is worth what someone is willing to pay for it. Most values are determined by weighted averages of EBITDA, Cash Flow, or Revenue.
With all of the factors involved, it is nearly impossible to accurately determine the value of your own business, so look to your advisor for assistance. This step is also a good time for a pre-screening with a lender to ensure your company meets current lending guidelines.
Marketing is an essential step in selling a business, and maintaining confidentiality throughout the marketing process is critical. Understand how and where your business will be marketed, and help your BPC advisor by providing some key strategic targets to engage with or to avoid. Be involved with the creation of the business profile that will show off your business. No one knows your business better than you.
Make sure that the marketing material protects your confidentiality and identity of your business. Marketing materials should not have any information that has simply been copied and pasted from your website or company marketing material.
Once inquiries begin arriving, BPC will help save you time and energy by pre-screening buyers to ensure they are not only serious but also financially capable of purchasing your business.
Working with BPC also continues to protect your confidentiality at this point in the process. For example, BPC insists that prospective buyers sign NDAs or confidentiality agreements, then meet with them face-to-face (if local) to educate them on the buying process. (BPC also present prospective buyers to you for your approval before we release any sensitive information to them, such as your business’s name.)
Once you have identified a serious prospective buyer, meet with the buyer together with your/advisor. This meeting is a chance for you to get to know the prospective buyer, to explain your business, and for the buyer to ask any questions they may have.
Typically, the discussion at this meeting is related to strategy, company history, nature of the business, and other high-level topics. (Fact-checking and reviewing smaller details are typically handled during the due diligence step, post-offer.)
A formal offer to buy your business is presented as an “Offer for Purchase” or “Letter of Intent” (LOI). This document outlines the details of the offer, including the offered purchase price, the payment terms, the training and transition period, any required employment or non-compete terms for you (the Seller) and potentially key employees, and any other conditions related to the offer.
After reviewing the details, you may accept the offer, reject it, or negotiate any aspects of the offer. Remember to negotiate more than price. Do not get hyper focused on the purchase price alone; price is one part of the big picture. Understand your tax liabilities, seller notes, hold-backs, earn-outs, non-competes and consulting agreements.
Only after an offer is agreed upon will you proceed to the final steps to selling a business.
The time between an accepted offer from the buyer and the official closing is when the buyer performs their due diligence. The objective during the due diligence period is to confirm that the business was accurately represented to the buyer prior to issuing their offer letter. Most buyers are looking only for material differences or surprises that were previously unknown to them, not minor discrepancies.
Clean books and records make this process significantly easier. Have the following information readily available to help the process along:
- Financial Reports
- Employee Records and Manuals
- Sales and Marketing Material
- Business Processes
- Insurance Policies
- Benefit Package Policies
- Vendor and Supplier Agreements
When due diligence and buyer financing arrangements are complete, it is time to draft the closing documents and complete the sale. Now is the time to trust your attorneys and accountants to help you with the various legal documents and to ensure you minimize the tax impact of the sale.
Ensure that you collect your funds and have all of the documentation you need when you leave the closing table.
From our decades of experience in buying and selling businesses in a wide range of industries, BPC is positioned to guide you through the selling process from start to finish. If you are thinking about selling your business, contact BPC today for a confidential, no-obligation consultation.
WHAT IS YOUR HVAC BUSINESS WORTH?
In order to know what your business is really worth, you have to gather all finance information you can find from the past years and compile into a report. Your potential buyers will probably ask for a complete report with numbers that justify the price you are asking.
Take a look at these metrics and make sure you put all information required in the report.
WHEN SHOULD I SELL MY HVAC BUSINESS?
In over three decades of working with business owners, one of the most common questions we hear is, “When is the right time to sell my business?” The short answer is: when your business is doing well. The long answer is a bit more nuanced. Drawing from our years of experience, here are two important factors to help determine when to sell an HVAC business.
What Do The Financials Say?
Hands down, the most important factor in selling your business (and thus, identifying when to sell your business) is its current financial state. You want to sell your HVAC business when it is doing well. We realize this feels counter-intuitive. If your HVAC business is thriving or trending up, it’s natural to think that if you wait a little while, you can get even more for your business. Unfortunately, that line of thinking has led to a load of regret for many sellers we know.
There have been countless times that we’ve valued an HVAC business at a desirable price, but due to a subsequent influx in business, the owner decided to hold off on selling. A year or two later, the business owner feels ready to sell… only to find out their business is worth less than it was before. What happened? Often, these owners encountered an unforeseen circumstance like a change in their health, the loss of a key client, or an unexpected downturn in the economy (we’re looking at you, COVID).
We understand the heartache and frustration that comes with this type of situation, especially after so many years of hard work. Getting a professional business valuation will provide essential information so that you can make the right decision at the best time for you and your business. The way we value a business helps indicate the best time to sell a company. We look at financial trends over time, which not only helps determine a sales price, but also assures a potential buyer that your business is stable and will likely continue trending upward.
Since we don’t know what the future holds, we must focus on what we do know. Financials are the best evidence of where your business is going.
What Do Your Priorities Say?
So, your financials are in order. On paper, it’s the right time to sell your HVAC business. But what if you’re not ready to retire? Good news: nearing retirement age is near the bottom of the list for determining when to sell a business. There are other priorities that can inform your decision. Maybe life has thrown you a curveball and you need an immediate influx of cash. Maybe you have another investment opportunity you want to take advantage of. Maybe a strategic buyer has shown interest in your company. Any of these scenarios indicate it may be time to sell your business.
We know you’re committed to the growth and success of your HVAC business. We also understand that as the business owner, securing your personal financial stability and growth is completely tied to the business. That’s a heavy and demanding load, especially in today’s economic climate. Consider this: BPC can help you secure your future with an upfront liquidity event, long term income and benefits with growth opportunities. We have been retained by an HVAC industry buyer who has proven operational processes to continue the growth of your company while securing your future, providing a secure platform for expansion while ensuring your financial security.
Timing is key when it comes to selling a business. Do not be caught wishing you had acted sooner. Make a confidential inquiry today, and find out if it may be the right time to sell your HVAC business.
THE PROCESS OF SELLING A BUSINESS
One of the most common questions we receive is, “What does a selling process look like?” While there are some common elements to every business sale, at BPC, we have developed a streamlined process that helps business owners not only complete the sale of their business, but also find the right buyer and earn top dollar during the process.
Our 7-Step Process for Selling a Business
Our process begins with a confidential introductory consultation that comes at no cost and with no obligation. This is an opportunity to learn more about you, your business, and what makes your business unique. This is also your opportunity to hear about what we do, how we do it, what it costs, and what you can expect throughout the selling process. Then, we will perform a confidential valuation to show you the range of your business’s value as well as a pre-screening with a lender to ensure your business meets current lending guidelines.
If you decide to move forward and engage BPC, we will gather a little information that summarizes the profile of your business. This information provides some essential details of your business’s greatest differentiators and assets, but without disclosing any names or other sensitive details We will use this document to share with our own network of qualified prospective buyers, all while protecting the confidentiality of you and your business
We will present any well qualified buyer to you for approval before we provide them any sensitive information (such as the name of your business). Then we set up a light introduction call with you and a potential buyer who is financially capable of purchasing your type of business. Protecting your confidentiality remains a priority at this stage, and we do that by insisting prospective buyers sign a confidentiality or non-disclosure agreement (NDA) if they would like to move forward and continue the discussion. Finally, we will present any well qualified buyer to you for approval before we provide them any sensitive information (such as the name of your business).
Next, you and the interesting company representative will meet with you, giving you an opportunity to get to know them a bit and explain your business a little more in depth (asking you additional questions as well). Normally the discussion at this meeting stays fairly high level, and in some cases a prospective buyer may wish to visit your office or see facilities or equipment. Many buyers will also wish to perform a more detailed review of your business’s financials after the meeting. These are all things we can assist you with, all while continuing to protect your privacy and ensure the highest level of confidentiality.
When a prospective buyer decides they want to buy your business, they will present a document called an “Offer for Purchase” or “Letter of Intent” that outlines the details of the offer. The offer will include much more than just a number. In addition to the offered purchase price, it will include the payment terms, any required employment agreement or non-compete agreements, the training and transition period, and any other business terms and conditions related to their offer. We will meet with you to explain and discuss the various components of the offer and provide our expert opinion and guidance to help you make the decision that is right for you. Ultimately, you will decide to accept the offer, reject the offer, or negotiate parts of the offer.
After you accept an offer from a buyer, the due diligence period begins. This is the buyer’s opportunity to confirm that the business was accurately represented to them before they proceed to closing. Most buyers are checking for material differences or surprises that were unknown to them prior to submitting their offer, not just combing for minor discrepancies. However, the length of this period and level of detail can vary greatly, and this is generally dictated by the buyer. We will counsel you and assist wherever possible throughout this period.
Additionally, while most deals that reach due diligence proceed to closing, your business is not sold until the sale closes. So, while the prospective buyer performs their due diligence, we keep the sales pipeline open and continue collecting new inquiries.
Once due diligence is complete and buyer financing is secured, the next step is to prepare for closing. We can recommend legal and financial counsel (attorneys and accountants), and your BPC intermediary will remain with you through the end of closing and even post-closing in case any last minute or post transaction questions or concerns arise, ensuring that you collect your funds and have all of the documentation you need when you leave the closing table.
If you are selling a business, or considering selling a business, contact us today to schedule that first conversation. We are here to help.
Our process begins with a confidential introductory consultation that comes at no cost and with no obligation. This is an opportunity to learn more about you, your business, and what makes your business unique. This is also your opportunity to hear about what we do, how we do it, what it costs, and what you can expect throughout the selling process. Then, we will perform a confidential valuation to show you the range of your business’s value as well as a pre-screening with a lender to ensure your business meets current lending guidelines.
If you decide to move forward and engage BPC, we will gather a little information that summarizes the profile of your business. This information provides some essential details of your business’s greatest differentiators and assets, but without disclosing any names or other sensitive details We will use this document to share with our own network of qualified prospective buyers, all while protecting the confidentiality of you and your business
We will present any well qualified buyer to you for approval before we provide them any sensitive information (such as the name of your business). Then we set up a light introduction call with you and a potential buyer who is financially capable of purchasing your type of business. Protecting your confidentiality remains a priority at this stage, and we do that by insisting prospective buyers sign a confidentiality or non-disclosure agreement (NDA) if they would like to move forward and continue the discussion. Finally, we will present any well qualified buyer to you for approval before we provide them any sensitive information (such as the name of your business).
Next, you and the interesting company representative will meet with you, giving you an opportunity to get to know them a bit and explain your business a little more in depth (asking you additional questions as well). Normally the discussion at this meeting stays fairly high level, and in some cases a prospective buyer may wish to visit your office or see facilities or equipment. Many buyers will also wish to perform a more detailed review of your business’s financials after the meeting. These are all things we can assist you with, all while continuing to protect your privacy and ensure the highest level of confidentiality.
When a prospective buyer decides they want to buy your business, they will present a document called an “Offer for Purchase” or “Letter of Intent” that outlines the details of the offer. The offer will include much more than just a number. In addition to the offered purchase price, it will include the payment terms, any required employment agreement or non-compete agreements, the training and transition period, and any other business terms and conditions related to their offer. We will meet with you to explain and discuss the various components of the offer and provide our expert opinion and guidance to help you make the decision that is right for you. Ultimately, you will decide to accept the offer, reject the offer, or negotiate parts of the offer.
After you accept an offer from a buyer, the due diligence period begins. This is the buyer’s opportunity to confirm that the business was accurately represented to them before they proceed to closing. Most buyers are checking for material differences or surprises that were unknown to them prior to submitting their offer, not just combing for minor discrepancies. However, the length of this period and level of detail can vary greatly, and this is generally dictated by the buyer. We will counsel you and assist wherever possible throughout this period.
Additionally, while most deals that reach due diligence proceed to closing, your business is not sold until the sale closes. So, while the prospective buyer performs their due diligence, we keep the sales pipeline open and continue collecting new inquiries.
Once due diligence is complete and buyer financing is secured, the next step is to prepare for closing. We can recommend legal and financial counsel (attorneys and accountants), and your BPC intermediary will remain with you through the end of closing and even post-closing in case any last minute or post transaction questions or concerns arise, ensuring that you collect your funds and have all of the documentation you need when you leave the closing table.
If you are selling a business, or considering selling a business, contact us today to schedule that first conversation. We are here to help.
Going Concern Value is most relevant for businesses that expect to continue operating and growing indefinitely. This is one of the valuation concepts used in calculating asset-based business valuations, and when referring to Going Concern Value, we mean that the business’s value is expressed in terms of the expected future growth of the business.
Another of the asset-based valuation concepts is Liquidation Value. In contrast to Going Concern Value, Liquidation Value applies to a company that is going out of business and liquidating its assets. A key difference here is that the liquidation value of assets is typically lower than fair market value.
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization” and is one of the valuation concepts required for an earnings-based business valuation. In the Multiple of Earnings formula, the business’s revenue is expressed as EBITDA; then the business’s value is calculated by assigning a multiplier to its current revenue. The appropriate multiplier varies widely depending on the specific industry, current market trends, and economic climate.
Future and Discounted Cash Flows are the main valuation concepts involved in income-based business valuations. Generally speaking, Cash Flow, which takes into account taxes, capital expenditures, and working capital changes, is the true determinant of the business value. Future Cash Flow is then based on the assumption that historical results of the company’s earnings are useful in predicting the future results of the business. Discounted Cash Flow, or DCF, means we apply a discount to the Future Cash Flow value to account for risk how to get a loan with bad credit.
As mentioned above, Future Cash Flow is one of the most critical valuation concepts used in determining a business’s value. But, Transferability of Future Cash Flow can have just as much impact on the worth of the business. How transferable is the company’s Future Cash Flow from the current owner to a potential buyer? When a company’s Cash Flows are primarily controlled and influenced by the owner’s customer relationships and delivery of service, that personal goodwill is not transferable and provides little to no commercial value. In this scenario, if the current owner does not plan to stay after his or her company is acquired, the company’s worth may be limited to its tangible assets. Thus, it is imperative that owners build a strong management team so that the business can run smoothly even without the current owner in place.
If you would like more industry-specific information or a more accurate picture of what your business is worth, contact us today to request a custom valuation.
Going Concern Value is most relevant for businesses that expect to continue operating and growing indefinitely. This is one of the valuation concepts used in calculating asset-based business valuations, and when referring to Going Concern Value, we mean that the business’s value is expressed in terms of the expected future growth of the business.
Another of the asset-based valuation concepts is Liquidation Value. In contrast to Going Concern Value, Liquidation Value applies to a company that is going out of business and liquidating its assets. A key difference here is that the liquidation value of assets is typically lower than fair market value.
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization” and is one of the valuation concepts required for an earnings-based business valuation. In the Multiple of Earnings formula, the business’s revenue is expressed as EBITDA; then the business’s value is calculated by assigning a multiplier to its current revenue. The appropriate multiplier varies widely depending on the specific industry, current market trends, and economic climate.
Future and Discounted Cash Flows are the main valuation concepts involved in income-based business valuations. Generally speaking, Cash Flow, which takes into account taxes, capital expenditures, and working capital changes, is the true determinant of the business value. Future Cash Flow is then based on the assumption that historical results of the company’s earnings are useful in predicting the future results of the business. Discounted Cash Flow, or DCF, means we apply a discount to the Future Cash Flow value to account for risk how to get a loan with bad credit.
As mentioned above, Future Cash Flow is one of the most critical valuation concepts used in determining a business’s value. But, Transferability of Future Cash Flow can have just as much impact on the worth of the business. How transferable is the company’s Future Cash Flow from the current owner to a potential buyer? When a company’s Cash Flows are primarily controlled and influenced by the owner’s customer relationships and delivery of service, that personal goodwill is not transferable and provides little to no commercial value. In this scenario, if the current owner does not plan to stay after his or her company is acquired, the company’s worth may be limited to its tangible assets. Thus, it is imperative that owners build a strong management team so that the business can run smoothly even without the current owner in place.
If you would like more industry-specific information or a more accurate picture of what your business is worth, contact us today to request a custom valuation.