What Chinook Needs to Sell your Business
To engage this process fully, you will to need to assemble and provide, over the course of the process, some or all of the following documents or information:
- A minimum of 3 years (although 5 years is preferred) of accountant prepared financial statements including balance sheets.
- Year-to-date interim financial statements, either management prepared or accountant prepared.
- Copies of the lease for your premises, and any other leases or contracts for equipment, vehicles, etc.
- A list of furniture, fixtures and equipment (“FFE”) and its estimated current market value.
- Average level of your business inventory and any seasonal fluctuations we should be aware of.
- A copy of your current fiscal year General Ledger (or digital file in PDF format).
How We, Chinook and You, Get Started
The first, and most important, step is the valuation of your business. At Chinook, we understand that in making the decision to sell you are making a life decision. Life decisions are all about what is next. For most, life decisions have a price tag. Maybe you are selling because you wish to retire or pursue another opportunity. Whatever the reason may be, moving to the next stage in your life will have a cost associated with it.
When Chinook provides a valuation, the goal is to advise you, the business owner, what a reasonable expectation from the marketplace may be for your business. Chinook will also help you understand how much of the selling price stays with you. We bring considerable experience, expertise and knowledge of the marketplace when we do valuations. We understand not only business valuation methodology, we also fully understand valuation from the buyer’s perspective. We work with buyers every day. It matters little what one says their business is worth. When all is said and done, a business is only worth what someone is willing to pay for it.
It is important that you have as full a picture as possible to make the best decision for you. You will also learn about deal structuring: the ‘terms’ involved in the ‘price and terms’ of the deal so that you can anticipate being used to close a transaction of this nature. As illustrated in the ‘Business Owner Flow Chart’ in the Exit Planning section, once you know the probable financial outcome of selling your business, your next move can be truly informed.
For example, let’s say it is your desire to retire. If the valuation is lower than you’d hoped you will need to decide if the condo in Turks and Caicos must be struck from your wish list and replaced with the trailer on the Baja instead. Or perhaps you will decide to roll up your sleeves and return to your business and address some issues that will add value so you can get to Turks and Caicos after all. Your Chinook representative will help you understand your options.
Once you are satisfied that you can go ahead, you will formally engage Chinook to work with you in preparing your business for sale by signing our standard form of “Engagement Agreement”.
How Chinook Finds Buyers
If you are satisfied with the MPSP you are ready to prepare for market. Chinook will prepare a summary, detailed profiles and other marketing materials to package your business for sale. This will include a blind profile of your business. A blind profile is used to attract buyers without revealing the identity of the actual business that is for sale. There will also be a multi-page document with detailed information about the business, your industry, market trends and conditions, and so on. This is called the Confidential Business Profile (CBP) or Confidential Information Memorandum (CIM). The CBP or CIM contains everything a potential buyer may find relevant to understand the opportunity and take action where the business is of interest to them. The CBP or CIM will take on a format that is most appropriate for your business. Everything that Chinook prepares on your behalf is edited and approved by you before it is used in the marketing of your business. Chinook provides the expertise. You provide the direction.
When these marketing materials are complete and approved by you we are ready to go to market. Luck is opportunity met with preparedness, and at Chinook we prefer to be lucky as often as possible!
Chinook will expose your business to buyers that are already known to us, as well as buyers throughout the world that we access through the various marketing methodologies that we employ.
How Chinook Works to Keep the Sale of Your Business Confidential
Nothing good comes from people knowing your business is for sale. Employees will fear for their jobs, competitors will start vile rumours, suppliers will become more cautious and bankers will develop reticence. Only people who are truly interested and have the means to buy your business need to know it is for sale. Through the Chinook process of pre-screening and non-disclosure documents (NDA) we dramatically reduce the chances that word will get out. Through every step we keep confidentiality as our first priority.
That Buyer Seems Sincere, Now What?
When a buyer wants to make an offer on your business, Chinook will facilitate the negotiations. As an intermediary, we work to build bridges between what the buyer wants and what the seller wants. The individual intermediary that has brought your business to market will act on your behalf in these negotiations. Another intermediary from Chinook will be assigned to work on the buyer’s behalf. The fact is that a transaction cannot be achieved unless the goals and objectives of both parties are met. We are keen that the seller should receive full value for their years of hard work. That is only possible if the transaction is also meeting the needs of the buyer.
A main street buyer must achieve three things when buying a business: earn a living wage, make enough money to repay debt they incurred to buy the business, and a receive a return on the money they put into the deal. This return on invested cash is called ROIC: Return On Invested Capital.
When you, the seller, and the buyer have agreed to price and terms on an offer to purchase, the most important work you should expect from us occurs: Due Diligence.
Due Diligence – What to Expect
While the business is on the market, it is important that the Seller find, prepare and maintain certain records and information that will be required during the Due Diligence phase of a sale. Due Diligence refers to the inspection and verification of information, documents and records that a potential buyer will undertake who has made an offer to purchase that has been accepted. Chinook will explain this and work with you to identify and collect the documents and information that will be part of this process. It is important to be prepared: 50% of potential sales fall apart in Due Diligence. Not so on our watch. Not so because of the assistance you provide us. Working with Chinook will prepare you for the precious and exciting moment of an acceptable offer being made. Luck is opportunity met with preparedness. Wait, we already said that!
Chinook’s Commitment – and Yours!
Chinook is committed to doing our best and most professional job helping owners achieve their objectives. A timely and best-value sale of a business requires Chinook to invest a lot of time and resources into the task. By entering into an Engagement Agreement with Chinook, a business owner also makes a significant legal, financial and personal commitment. At Chinook we acknowledge, understand and appreciate this commitment. We are grateful for the opportunity to work with business owners in this process, and look forward to getting started!