December 24th, 2007 quantum
The list price for a business is usually a multiplier of Seller’s Discretionary Earnings or “SDE.” In order to prepare adjusted financial statements and determine SDE, an audit trail must be created to support representation of the Seller during due diligence. Toward that end, below is a partial checklist of items to assemble once you commit to the sale of your business.
Following things should be included in financial history:
1. Profit and loss statements for the previous 3 years
2. In order to establish the true earning capacity or cash flow for the business and
demonstrate how profitable it truly is - review each expense item reflected on the
yearly profit and loss statements requested above and create a schedule of all the
unnecessary items not essential to operate the business. These include all
“discretionary,” (owner perks and benefits such as automobiles, boats and planes
for personal use, excess or unnecessary labor or salaries [i.e., family members on
the payroll], unnecessary travel and entertainment, contributions to retirement or
personal insurance plans and extraneous personal or unnecessary expenses
including telephone, repairs, etc.) “non-recurring” (moving expenses)
“extraordinary” (gain or loss from the sale of business equipment) or “one-time”
(equipment purchases not made in the ordinary course of operating the business)
expense items
3. Balance Sheets for the previous year
4. Copies of all documentation related to the ownership of intellectual property including the establishment of all copyrights, trademarks, service marks,trade names and patents
5. Contracts
- Janitorial and maintenance contracts
- Landscaping contracts
- Telephone answering service or other service contracts
- Order fulfillment service contracts
- Uniform and laundry contracts
- Fuel service contracts (bulk oil, propane, etc.)
- Advertising and marketing contracts
6. A schedule of business long-term liabilities, including:
- Real estate loan documents
- Promissory notes, outstanding lines of credit, etc.
- A schedule of any outstanding officer’s loans, including supporting documentation, if any
7. Web site statistics, including: (a) percentage of organic versus pay per click traffic (b) conversion rate, (c) list of search engines in which indexed, (d) organic ranking information for various key words for each search engine, (e) pay per click budget per month broken down by each key word for each search engine, (f) number of one-way links, if any (g) number
of unique visitors each day, (h) number of page views each day, (i) any
online review sites (if so, provide links) and (j) hosting information.QBSNet, can assist you in documanting and packaging your business for sale in an organized and presentable manner.
For more assistance in business transactions, visit Quantum™ Blog.
Posted in Selling a business | No Comments »
December 13th, 2007 quantum
It is important for business sellers to provide certain important information to prospective business buyers. As mentioned in a previous blog post, this is done for them to get a comprehensive overview of the seller’s business. Thus, proper preparation is necessary for the best presentation of your business and is required in order to provide meaningful insight to prospective purchasers. To accomplish this, the business must be properly packaged with all applicable records and facts organized and documented in the most strategic way to maximize potential value. This ensures a presentation of our client’s business in the best light, while providing the purchaser with a solid audit trail to corroborate the seller’s representations of value. In this post, we examine the need for the seller to provide the business with certain legal and marketing information.
The legal information provided will enable the buyer to ensure that the business is operating in compliance with laws governing the particular industry.
The marketing information provided will allow the buyer to assess existing marketing/advertising efforts of the seller and determine additional avenues to pursue ion order to further grow the business.
Therefore, the following legal and marketing checklist items, if applicable, should be provided by the seller to the buyer:
Marketing Information:
- Sales catalogs, brochures, fliers, etc.
- Advertising examples
- Overview of web site
- Product specification sheets
- Marketing plans
Legal Information:
- If incorporated, copy of Articles of Incorporation
- If incorporated, copy of By-laws
- If incorporated, copy of organizational Minutes
- If Limited Liability Company, copy of Operating Agreement and LLC organizational Minutes
- If partnership, a copy of the partnership agreement
- A copy of any joint-venture agreements
- A copy of any fictitious business name filings
- A copy of any sales and use permits
- A copy of any real estate deeds and/or leases for real property available as part of the sale of the business
- Any zoning approvals
- Any state or federal licenses
- Any franchise agreement if the business offered for sale is a franchise
- A copy of the complaint for any pending litigation
- Copies of all documentation related to the ownership of intellectual property including the establishment of all copyrights, trademarks, service marks, trade names and patents.
Including the above mentioned information in your checklist will enable the buyer to assess your business and decide it viability as a valuable business opportunity.
Keep visiting Quantum™ Blog for more updates.
Posted in Selling a business | No Comments »
December 1st, 2007 quantum
In a previous Blog Post titled, ‘Checklist for Business Sellers (Part 1 of 6), a list of 6 categories provided for organizing the information and documentation which is important for an organized presentation of your business. In the current blog, the first category of the checklist i.e, ‘Business Overview’ is further categorized into key topic headings for organizing your data concerning the business.
Business Overview:
- Description of the business
- Personal profile/resume of the business owner/manager
- Reason for the desired sale of the business (try to allay any suspicion that you are trying to unload a business with hidden problems)
- The business products and/or services (include photographs, if appropriate)
- A description of the primary business markets
- A listing of the primary customers of the business
- A listing of the primary suppliers of the business
- Any major or primary customer testimonials
- Any significant items evidencing industry recognition (i.e., awards, reviews, favorable media attention or comments, citations, etc.)
- A schedule of key-employee personnel (including short personal biographies) with an organizational chart. Important note: A competent manager can be a very strong selling point. If your business is large enough to have an experienced manager, other than yourself, who can stay with the business, emphasize this individual’s talents and potential. Having highly experienced people on staff communicates to the buyer that the future success of the business isn’t dependent on you as the owner
- A schedule of owned and leased assets, including photographs if appropriate
- Provide the primary locations of the business
- Provide copies of contracts with employees and independent contractors
Quantum™ Business Solution Network will guide and assist you in compiling relevant information for your business and create a detailed profile or prospectus.
Posted in Selling a business | No Comments »
