Selling Your Company Now!

David Meade

Description

Are you about to acquire or sell a business? Do you have a good Seller's Due Diligence Package? This is what this book is all about—it will give you everything you need to sell your business. When it's time to sell your business, you want to achieve a maximum price, a minimum level of closing costs and the shortest length of due diligence time and closing time possible. Those are the seller's objectives. In order to accomplish this you must provide the buyer with a proper Due Diligence Package. In this book the author goes through, step by step, all of the items needed to package and present your business properly.

This book will help you prepare for what could be the most important negotiations in your life. This book has nailed it with lots of key factors to consider and ultimately implement before and during the sales process of your company. Having key documents in place is really crucial so that you are not stressed with everything that needs to be thought about and covered during the process.

This book is your advisor. Read this book before and during the sale or purchase of a business. The book will help you avoid some very expensive mistakes. Each deal is different so you need to go into it with as much knowledge as you can get. This book is a great eye-opener to this complex process and provides you with very critical information.

This book is a good place to start turning your dream into a reality. SELLING YOUR COMPANY NOW is written mainly for business owners as a guide to selling their business. In clear, thoughtful language, the book manages to take the principles inherent in an ideal "exit strategy" for any business — and make them coherent, accurate and helpful. The insights offered within apply to every size business, from the smallest to the largest. They are fundamental principals that must not be ignored, except at the peril of the seller—and the buyer.

Sujets

• Economie gestion
• Economics
• Business
• Finance

Informations

• Publié par: eBookIt.com
• Date de parution: 13 janvier 2016
• Nombre de lectures: 0
• EAN13: 9781456626259
• Langue: English

Extrait

SELLING YOUR COMPANY NOW!
By David Meade
© 2015 David Meade
Author’s Website:
http://www.writers-web-services.com/
TABLE OF CONTENTS


INTRODUCTION
FINANCIAL RATIOS
OPTIMIZING YOUR WEBSITE PRIOR TO SELLING YOUR COMPANY
ON PAGE OPTIMIZATION
Checklist for Word Press Recommendations
OFF PAGE OPTIMIZATION
37-ITEM SEO CHECKLIST
LANDING PAGE OPTIMIZATION RULES
Websites reportedly favored by Penguin
Sample Website Audit Findings
TECHNICAL ANALYSIS
How to Value an Operating Business
The Discounted Cash Flow Model
The Risk Free Rate
The Equity Risk Premium Rate
The Size Premium
The Company Specific Risk Premium
The Gordon Growth Model
Excess Cash and Liabilities
Contact Information
INTRODUCTION

Do you have a good Seller’s Due Diligence Package? This is what this book is all about – it will give you everything you need to sell your business. When it’s time to sell your business, you want to achieve a maximum price, a minimum level of closing costs and the shortest length of due diligence time and closing time possible. Those are the seller’s objectives. In order to accomplish this you must provide the buyer with a proper Due Diligence Package. In this book we go through, step by step, all of the items needed to package and present your business properly.
Normally this is a multi-step process. A good Seller’s Due Diligence package has at least a dozen critical items in it, including common size financials (historical), recast and projected financials (at least 5-6 years), a discounted cash flow methodology or an appropriate alternate method listed and explained in detail, a variety of footnotes and limiting conditions, an analysis of all key financial ratios, a description and analysis of the technical and narrative sections of the company’s website, and a description of the method used in determining the net present value of cash flows. A variety of discretionary expenses as well as owner’s compensation are normally added back to attain Free Cash Flow, the basis for all major valuation methodology.
We’ll get into all of this in the book. This report usually has a micro and macro economic analysis as well of the industry and economic status and growth factors projected for the company. The report can be from 30 to 50 pages long. It is released to the prospective buyer only after the buyer signs a standard Non-Disclosure or Confidentiality Agreement, often just a short one-page document. In it the buyer also presents his or her qualifications to a certain extent, usually the amount of liquidity or cash the buyer has to work with and a ballpark estimate of their net worth.
Once that Agreement is signed, then and only then is this very valuable report released. It should answer every conceivable question the buyer will have to allow him to present an offer – a Letter of Intent. The Letter of Intent is stage two. It allows a due diligence period of 30 days or so and allows the buyer to examine the backup for the report. At a minimum this is normally the last 3 years of corporate tax returns for the business, and copies of leases and as well as any other data deemed appropriate between the parties.
The buyer will usually have a Forensic Accountant (like me) representing him. An Attorney will prepare the Letter of Intent. If the term sheet attached to the Purchase Agreement which is subsequent to the Letter of Intent is agreed on by all parties, you have a deal. Often sellers will provide a level of financing to the buyer, some up to 25 to 50% in the terms of a purchase money mortgage, with interest calculated at so many points over prime as listed by the Wall Street Journal. Some buyers may utilize the Seller’s Due Diligence package to obtain bank financing.

The Due Diligence Package will allow you as the seller to reduce the time frame on the overall deal by months. Each buyer will not have to sift through data and do the work. You will not have to respond to requests which may be unreasonable – in other words, you don’t want to release tax returns or other proprietary data until you have a firm Letter of Intent with at least a 5% range deposit. The buyer cannot proceed to make an offer without a reasonably high level of data collection, but you don’t want him during the early due diligence period to have access to your tax returns and other data which has personal identifying information on it. The Seller’s Due Diligence package is the absolute solution.

Another interesting point is that you probably don’t require a real estate broker at all. This adds anywhere from 6-7% to the transaction. You can find with a Google key phrase search anywhere from 3-5 sites on the Internet to list your business. Of course, you can also list it electronically online in your local newspaper under businesses for sale. One of our services, in addition to the huge benefit of a complete 40-page Report (the Sellers Due Diligence Package), is that we can direct you to the right sites and write the copy for the sites. You just take the polished narrative and enter it yourself at your discretion online after you make a final decision as to the best online presence to market your business or practice. Everything is really done online today. You can even add a Page to your Website with a well-written introduction to your business, and have a downloadable PDF copy of our report once it is written available on the site. On WordPress you have the option of making a page “Private.” Just create the Page and mark it so. No one will have access unless you provide them the link. Only provide the link after you have received a response from a qualified buyer who has signed a Confidentiality Agreement. It streamlines your time and indicates major professionalism.
We’ll start our journey now.
FINANCIAL RATIOS

Warren Buffett gave a talk at Columbia University about how companies with a durable competitive advantage show great predictability and strength in earnings growth and that growth turns their shares into the equivalent of an equity bond, with an ever-increasing coupon or interest payment. The “bond” is the company’s equity, and the “coupon/interest payment” is the company’s pretax earnings. This is how Warren buys entire businesses. He looks at pretax earnings, key performance ratios and then uses a discounted cash flow methodology to price the business. In any Seller Due Diligence Package this is an essential section.
Financial ratios are a study of consistency. Does the company have high gross margins? Does it consistently carry little or no debt? Does it consistently not have to spend large sums on research, development or capital expenditures? Does it show a consistent earnings growth? If so, the company has an element of durability, the company’s competitive advantage.
Using historical income statements, we can determine such items as the gross margins, the return on equity and the direction of its earnings. The long-term viability of the source of the company’s earnings is what we’re interested in.
Wall Street has an acronym for earnings calculations that are used in valuations. It is EBITDA – it means Earnings before Income Tax, Depreciation and Amortization. When analyzing ratios on an historical basis, this is the protocol utilized.
GROSS MARGIN
The gross profit margin is defined as the gross profit, divided by the firm’s revenue. Gross profit defines the cost after raw goods are paid for. Companies that have excellent long-term economics working for them always tend to have a significant gross margin. Companies with poor long-term economics show unimpressive gross margins.
What creates the high gross profit margin is the durable competitive advantage of the corporation, which allows it the freedom to price products and services well in excess of cost of goods sold. Without this distinct competitive advantage, a company must compete by lowering the price of the product, causing lower profit margins.
The gross profit margin measures the amount that customers are willing to pay for a company's product, over and above the company's cost for that product.