How to Sell a Small Business?

How to Sell a Small Business?

Selling or repassing a company is a very common operation and little known and disclosed in Brazil. When the theme is the sale of small businesses then the situation becomes even rarer and unassisted, because there are few companies in the country that advise this type of market. Spending a business, passing on a franchise, selling a running business, and finally trading a goodwill requires some special care in order to avoid harm and major headaches.

Consultants with multidisciplinary professionals such as lawyers, auditors, accountants, business analysts, and others with a great deal of expertise in the preparation of large corporations for mergers and acquisitions operations are on the market. The costs of these projects, however, are quite incompatible with the niche of small and medium-sized businesses. We often serve customers who, for various reasons, have reached the conclusion of the sale of your company. From that point on, doubts arise as a result of the lack of orientation for this type of operation.

We are faced with questions such as: How does the market buy and sell companies?What is the value of my company? How do I find an interested party in my business?

Selling a small business is a lot harder than it looks and for this reason we have created a guide with simple and practical guidelines to speed up the negotiation.

Simplified Negotiation Process: 4 Steps

The subject is complex and difficult to explain briefly, but for the purpose of guidance, we try to simplify and separate the operation into four stages: the first is the preparation of the company for sale, the second is the definition of a value for negotiation, the third in the search for potential buyers for the business and the fourth is based on the formalization of a legal instrument that protects the parties involved in the negotiation . Remembering that in all these steps secrecy is an indispensable element.

First Step: Preparation

The preparation of a company for sale requires the organization of all information regarding the results and equity of the company, technically these numbers should be covered by the company’s accounting. But as we know, in small businesses, accounting does not always portray the true business situation. Therefore, information such as billing history, fixed assets, an organization of personal documentation, updating of inventory controls, delinquency, cost control and fixed and variable expenses, customer and supplier listings, opportunity analysis, strengths, and weaknesses should be collected. weak. Anyway, everything that can prove the situation of the company.

It is also very important to issue certificates of the company and the partners, noting that if any certificate is not issued, all documentation of the origins of the respective pending should be provided. The key is that no information is hidden in the presentation to the prospective buyer. In addition, in the preparation phase it is important to try to correct some informalities, if they occur, typical of small companies such as contracts in the names of individuals and/or partners such as rents, telephony, services and other services that are not corrected in time may cause disruption in the effective disengagement of vendors.

Step Two: Defining the Value of Trading

As for the value of the negotiation, there are several methods of evaluation, which will usually need the information of results compiled in the first stage. In general, small businesses are valued based on cash generation capacity, projected for future results.

Third Step: Search for Potential Buyers

From there, it is necessary to start looking for interested parties, which can be done by the entrepreneur himself, highlighting possible wear and tear on negotiations with buyers, due to conflicts of interest or consultants who will normally be paid for the success of the business, since this type of company does not have the financial capacity to pay fixed fees or advances. At this stage, secrecy becomes the main element, because if the information becomes public, there may be a compromise in the operation of the business.

Fourth Step: Operation Formalization Contract

And finally, after the selection of the candidate and formalization of the letter of intent and acceptance of the seller, the need arises for the preparation of the contract formalizing the operation, tying in addition to the price and form of payment, the rules established between the parties throughout the trading period. All the flow presented above requires a maturation time, which can be over six months, so the sale decision needs to be made considering this variable and always guided by another element called common sense.

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