Business Owners

WHAT TO EXPECT WHEN SELLING YOUR BUSINESS....

If you are curious about what is involved in selling your business, this page is where you'll want to start...

Watch the videos below to learn more about selling your business...

How Long Does a Sale Take?

The Timeline To Selling Your Business...

The time it takes to sell a business can vary depending on how prepared you are to sell. Here is a typical timeline of sale with Saddle Horn...

Pre-Contact

Determine if you are TRULY ready to sell. Ask yourself what you would like to see in a buyer. Knowing what to expect from a buyer and from a process will put you on strong footing when somebody approaches you or when you seek somebody to represent you in a sale.

Question To Ask:

  • Do I want to sell to an experienced owner or a financial firm?
  • Do I value the highest price possible above everything else?
  • Do I want to roll equity and participate as an investor/advisor in the future?
    What will the transition period look like?
  • How will the buyer handle my employees, customers and suppliers?

    • Timing

    Pre-Contact

    Initial Contact

    This is the phase to get to know your potential buyer. You'll want to find out not only how they are professionally but also personally. You'll be spending a lot of time with them if you choose to sell to them. Seek to confirm if they are trustworthy and legitimate.

    Questions To Ask

  • "What do you specifically like about my business?"
  • "Have you run a business before? Have you bought a business before?"
  • "What resources will you bring to a business you buy?" (money, knowledge, people, industry strength)
  • "What do you look for in a business" (and does what you look for sound like my business)?
  • Can I work with this person over the next year?
  • Do I want to bring in other partners/shareholders right now?

    • Timing

    1 - 2 Weeks

    Discussion, Valuation, Initial Offer

    At this point, you should believe your potential buyer is a legitimate candidate to buy your business. And if that is the case, they will want to see some basic financial information, usually 3 years of financial statements. This is the time to sign a non-disclosure if you have not already. Your buyer should be able to give you an overall value for the business.
    It's very likely your buyer will seek to determine the EBITDA your business generates--it's the standard metric used in private sales and financing.

    Questions To Ask

  • "What do you require in order to give me an offer?"
  • Do I want my accountant or lawyer to assist? (Yes)
  • Are there any major personal expenses driving down profits at tax time that can be added back to the bottom line? (eg. truck payment, wife's/kid's salary, inflated rent charge, dividends as salary)
  • Do I want to sell the real estate or stay as landlord? What $?
  • Do I want to roll equity and participate as an investor in the business moving forward?
  • How long am I willing to stick around to help the new owner?
  • How many years earlier can I retire and is that what I want to do?

    • Timing

    1 - 2 Weeks

    Finalized Offer

    This phase starts when you've been given an initial offer. You'll want to get down to the grittier details before signing a non-binding letter of intent that lays out the parameters of a sale that will be put into a lengthy sales and purchase agreement in a few months. This letter given by the buyer will also lay out what they need to investigate as part of their diligence. Ultimately, the major negotiation should be now so that due diligence is a exercise in confirming your numbers.

    Questions To Ask

  • "What is your the target signing date?"
  • "How do you plan to finance the purchase?"
  • "Who are your lawyers and accountants assisting you in diligence?"
  • Have I talked to my accountant about tax implications from this sale?
  • Can I provide access for all of the diligence items requested (including key staff)?
  • Do I want to provide a percentage of the sale price as financing (if the bank requires that?)
  • Can my accountant help me with a 'normalized Net Working Capital' target?
  • Am I getting the cash at close that I need to make this worthwhile?

    • Timing

    2 - 3 Weeks

    Due Diligence

    You may find this phase surprisingly grueling. Expect over 100 questions from your buyer about financials, legal, customers, staff, suppliers, marketing and sales. The buyer's (and their accountants') job is to verify everything they are shown. They will ask for proof of many things--do not take it personally. Having your accountants assist will be an asset.

    Questions To Ask:

  • Who internally will need to know we are exploring a sale?
  • When do I bring in internal people
  • Have I carved out time to gather all of these documents and requests
  • When is it appropriate for the buyer to do a site visit?

    • Timing

    8 - 12 Weeks

    Closing

    At this point, you are tying up loose ends and working on the final agreement(s) of the deal. There should not be any major re-negotiations since the letter of intent unless something material was uncovered during diligence. Usually, the only major item left open is the net working capital that will go with the business. This is a normal but sometimes contentious issue for sellers. Talk with your accountant and the buyer about it prior to this phase so expectations are clear. Same with any "holdbacks". The actual preparation and signing of documents is usually just paperwork.

    Questions to ask:

  • "What formula are you using to determine net working capital?"
  • Can any disagreements be solved through an earn-out so I can still get what I want?
  • When should we tell the staff?

    • Timing

    1 - 2 Weeks

    Transition

    This phase is usually the longest and least hyped. Together with your buyer, you should set a schedule of transition. This means either training this new manager or the buyer themselves for you agreed upon period. Depending on the structure of your deal, you may continue running the business even though your pockets are bursting with cash. This phase runs smoothest when expectations are crystal clear. Buyers at peace with their decision to sell often find peace in letting somebody else take their business in new directions, hopefully bigger and better.

    Questions To Ask:

  • What does this buyer critically need to know, even if they don't ask?
  • "Who can I introduce you to?" (Customers, Suppliers)
  • Who can I talk to privately if I disagree with new systems/methods?
  • How do I handle employees approaching me as if I am still the owner?
  • Should I step out of the way now?

    • Timing

    3 Months - 3 Years

    Private Equity
    Saddle Horn
    Search Funds
    Your Future Involvement
    Expect you to stick around for 2 – 5 years
    Allow you to retire
    Have never ran a business before
    Valuation For Your Company
    Negotiate on price until the last minute
    Open & Transparent negotiations, focusing on getting a deal done
    Limited capital leads to limited valuations
    Your Equity & Seller Financing
    Expect you to roll equity
    Seek arrangement that work for you
    Will ask for seller financing
    Where They Get Their Money From
    Insurance Funds, Pension Funds, Big Banks
    Our own pockets
    PE funds
    Financing Ability
    Ample access to debt and cash
    Use our own cash, many financing partners
    Limited access to debt and sometimes equity
    What Happens To Your Business & Your People
    Fond of cutting expenses and people
    Focused on businesses whose growth requires additions, not subtractions
    Growth driven by the search funder
    Will They Sell Again?
    Focused on selling again in 3 – 5 years
    No obligation to sell
    Depends on fund investors

    Saddle Horn

    Your Future Involvement
    Allow you to retire
    Valuation For Your Company
    Open & Transparent negotiations, focusing on getting a deal done
    Your Equity ∓ Seller Financing
    Seek arrangement that work for you
    Where They Get Their Money From
    Our own pockets
    Financing Ability
    Use our own cash, many financing partners
    What Happens To Your Business & Your People
    Focused on businesses whose growth requires additions, not subtractions
    Will They Sell Again?
    No obligation to sell

    Private Equity

    Your Future Involvement
    Expect you to stick around for 2 – 5 years
    Valuation For Your Company
    Negotiate on price until the last minute
    Your Equity ∓ Seller Financing
    Expect you to roll equity
    Where They Get Their Money From
    Insurance Funds, Pension Funds, Big Banks
    Financing Ability
    Ample access to debt and cash
    What Happens To Your Business & Your People
    Fond of cutting expenses and people
    Will They Sell Again?
    Focused on selling again in 3 – 5 years

    Search Funds

    Your Future Involvement
    Have never ran a business before
    Valuation For Your Company
    Limited capital leads to limited valuations
    Your Equity ∓ Seller Financing
    Will ask for seller financing
    Where They Get Their Money From
    PE funds
    Financing Ability
    Limited access to debt and sometimes equity
    What Happens To Your Business & Your People
    Growth driven by the search funder
    Will They Sell Again?
    Depends on fund investors

    Frequently Asked Questions

    As founders, we understand that selling your business is a personal and major life decision.

    We are discreet and treat you with respect as you examine the sale of your business.

    Whether you’ve decided to sell or if the thought is starting to cross your mind, we are happy to talk about what the sales process looks like. Contact us any time and we’ll be happy to answer any questions your may have.

    We offer complete exits and majority equity acquisitions.

    Your business will have a unique structure and needs, and we will be adaptable to create the best fit for you and your business.

    Most founders we work with seek a limited role in the future. This usually means a limited transition period and/or advisory role following a transaction.

    This structure allows a founder to retire, spend more time with family, or step back from the business.

    Many buyers looking at your business will be financial buyers with rigid fund structures and requirements. We are operators at heart…

    We always invest some or all of our own equity that we earned as founders. We are not bound by any artificial structures, and this allows us to do what is best for your business first. This also allows us to hold a business for the long-term or until the time is right to sell.

    We add value by growing already great businesses. This means we seek to expand existing business, not slash and burn through them.

     

    Your team helped grow your business to where it is today. We value the infrastructure and individuals who got it there, and we will work to ensure they can play a part in the next phase of its growth, equitably.

    CURIOUS TO LEARN MORE?

    OUR FOUR STEP PROCESS...

    Initial Discussion

    Ensure we can fit your goals and timelines for a sale now or in the future

    Valuation

    We provide you with a valuation and/or offer

    Your Call

    Decide if now or later is the right time

    Begin!

    CLICK HERE TO BEGIN

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