Selling Your Business?

If you are thinking of selling your business, this section is for you.

Approximately half the owners who purchase a valuation from SPARDATA plan to sell their businesses and use the valuation in order to know how much to ask for it. Even though SPARDATA does not offer brokerage services, owners often ask us for advice about how best to “package” their companies for sale.

Because this is such an important issue, we asked Rich Madzel (410-964-3353), co-owner of Business Match, Inc. to share his insights. Business Match (BMI) is not a ‘broker’; rather it offers a menu of services to no more than two clients at a time helping the owner prepare for the selling process, building a database of prospective buyers, and offering hand-holding and coaching throughout. Rich and his wife, Malynda, sold their own small business and the experience led him to start a new business called “Business Match” to provide consulting services to small business owners who are themselves thinking about selling. (Full disclosure: BMI pays SPARDATA a fee for referring people to it.)

Offer Letter
Gain the attention and interest of a potential business buyer with a one-page Offer Letter.	Offer Letter (PDF) Offer Letter (DOC)
Information Package
Provide more in-depth information to clients who have signed a non-disclosure agreement with a 5- to 15-page Information Package.	Information Package (PDF) Information Package (DOC)
Client Testimonial
Comments from a satisfied Business Match customer.	Client Testimonial Letter (GIF)

Step One: Getting Ready. According to Rich Madzel, Step One involves getting ready to sell to business. Tasks include (1) developing a profile of the most likely buyer (is it a local competitor or a national (or global) firm? Is the buyer likely to be in your industry, or rather in a related industry seeking to expand into yours); (2) creating a one-page “Offer Letter” intended to grab a prospective purchaser’s attention and interest; and (3) writing an “Information Package” of 5-15 pages providing more in-depth information to be shared with prospects expressing interest (and who first sign a Non-Disclosure Agreement).

Step Two: Create A Database Of Potential Buyers. Step Two is building a list of 75-100 prospects representing the people most likely to buy the business. Since the ultimate buyer is often someone the owner already knows, or knows of (local competitor, friend etc.), many of the names on the list will be familiar. The database is where you will focus the search for the ideal purchaser; every listing on it should include the (verified) name, title, mailing address, phone number and possibly email address of the prospect; all important because each will be personally called.

Step Three: Contact Best Prospects. Now the selling process starts in earnest. You or your agent contacts the 25-50 most promising candidates by certified mail. If Rich is managing the sale for you, he calls those prospects about a week after the mailing to determine the level of interest. If the prospect is interested, he secures a Non-Disclosure Agreement and provides the Information Package.

Step Four: Negotiate A Deal. At this point, in the ideal world the principals (the seller and the buyer or buyers) negotiate with each other to determine whether or not a deal is possible, and if so, on what terms. The SPARDATA valuation is particularly valuable here. Usually this process involves considerable “due diligence” on the prospective buyer’s part and Step Four may last months. As a practical matter, Rich stays involved and manages the negotiations since the seller is still running the business, and may not have the time or skill to handle negotiations.

In conclusion, selling a business is virtually a full-time job. Think carefully before making the decision to sell. If you choose to proceed, make sure you know what your business is worth so you can seize the right opportunity when it presents itself. And think seriously about having a professional do the “grunt work” for you.