After putting a lot of time, effort, and sweat equity into growing your business, you're looking to sell. I've been involved in a variety of different companies that have sold and it's not as easy as it seems. Your objective is to get the maximum value; to do so, you'll need to review every step of the 10-point selling process. There are a multitude of variables to consider and a very complex process to execute.

1) Find out what your business is worth.

Step one is getting a valuation. If you value your business too highly, it won't sell, defeating the whole point of this exercise. If you value it too low, you leave money on the table. Some of the factors considered when valuing a business include the business's sales numbers and profit margin. How much revenue does the business drive currently, and how much is it likely to fuel in the future? Is there recurring revenue? What's driving new sales -- and is that sustainable?

What are the company's growth trends? Which channels do new customers come from, and what's the breakdown of each?

In the bigger industry picture, what's the business's market position? How reliant is the business on the owner? What systems and processes are in place?

Part of the valuation process is also looking at the historical sales of similar businesses and comparing your business to those.

2) Determine whether you should sell on your own or use a broker.

Selling on your own is the best course of action if you're selling your business to a family member or employee. Utilizing a broker is optimal if you want to put the business to market and attract multiple buyers, maximizing the selling price. It's good to look at the different types of brokers and how they differ when you look at the size of companies they specialize in. Here are some examples of different types of brokers:

•       Bizbuysell.com: Specializing in businesses with less than $500,000 in yearly profit

•       BusinessExits.com: Specializing in businesses making $500,000 to $20 million in yearly profit

•       HL.com: Specializing in businesses with more than $20 million in annual profit

3) Gather your documentation.

Once you understand your business's worth and have determined whether you need a broker, it's time to prepare the documents and proof you'll need to show potential buyers. Buyers will want to see hard numbers and verifiable facts when considering purchasing your business. Additionally, if any of the data comes back as suspicious or incorrect, buyers can use this to lower their asking price or pull out from a deal altogether.

You'll need to gather your historical profit and loss data (preferably five years' worth), along with your historical balance sheet. Buyers will want to see a summary of your financials (tax returns, bank statements, and merchant statements), as well as a summary of the business and a summary of operations.

On the marketing side, you'll need to summarize your marketing strategies, as well as your products and features. Customer lists, a summary of customer sources, and your business's sales history will need to fit alongside a competitor landscape overview.

You'll also need to provide your articles of incorporation.

4) Develop the "book."

A prospectus, or CIM (Confidential Information Memorandum), is a detailed 15- to 40-page document that outlines what the business does, how the business makes money, and how the business operates. It details market trends, growth opportunities, and frequently asked questions about the company. It also notes where web traffic comes from.

This document is then used to initially highlight for prospective buyers the business opportunity and help them assess the business.

5) Find a buyer.

The best buyer pays the best price, has the best terms, and is the best fit for the business after the sale closes. Buyers can come from your personal network, your broker's network, or competitors.

Externally, you may locate buyers among vendors, private equity firms, strategic companies, and high net worth investors.

6) Get an offer.

An offer generally comes in the form of a letter of intent (LOI), a formal offer someone makes to acquire your business, including an offer price and terms. Once you accept this LOI, you allow the buyer to move forward exclusively into a deeper due diligence period, where he or she will investigate the claims you made about the business and verify them. A LOI is a nonbinding sales agreement, not a contract for sale.

As a seller, you need to consider the buyer's identity, offer price, and deal terms before moving forward. You should also look at the owner financing terms, noncompete terms, exclusivity, and closing timeline. It's also good to look at the post-sale support terms to see what's expected of you after the deal is done.

7) Do your due diligence.

Due diligence is the exclusive period of time a buyer uses to verify your claims about the business. During due diligence, a buyer might request bank statements, merchant statements, and credit card processing statements. You also may need to supply customer lists, a staff list, and suppliers' names and information.

Buyers who want to hear firsthand accounts may ask for interviews with staff, clients, and subcontractors. They may ask to see the contracts suppliers and staff have signed, as well as current and historical tax returns and balance sheets. Business systems and processes and a support desk overview can also be expected.

8) Review the legal offer.

After due diligence is completed, a buyer will make a formal offer or pass on the deal because it didn't pass due diligence. If purchasing, the buyer prepares a standard contract for sale, which outlines the deal terms and assets being sold. Additionally, the noncompete, training, and support terms are determined.

9) Close the deal.

After all parties have signed the sales contract, the transfer process commences. This process is broken up into a few stages. The sales contract is signed, and you (or the broker) set up the escrow transaction using a lawyer. The escrow transaction terms are agreed upon by both the buyer and seller.

The buyer then sends to escrow the agreed-upon funds; the escrow service confirms the receipt. An inspection period is used to confirm the transfer; after the buyer confirms, escrow releases the funds to the seller. Then, training begins for the buyer.

10) Offer post-sale training and support.

Typically, there's a four- to 20-week period of support for the buyer after the deal has closed if the owner's not staying on as an employee. (It may last up to five years with the owner as an employee.) This is a standard practice to assist the buyer in learning the particulars of the day-to-day management. The length of time and exact training that a seller provides is entirely contingent on what was negotiated in the terms of the deal.

Published on: Apr 25, 2018