Whether you are using a business broker or attempting to sell your business yourself, you will need to start with a solid business plan. Using the business plan as your base, you will need to edit it to create a confidential business review document (CBR). The CBR is the main document buyers will use to evaluate your business.
One primary area where the CBR document differs from a standard business plan is in finances. Generally, you will want to include a 3-year look at past P&L performance.
You will then want to take your 12-month trailing P&L and recast it to show it in a more favorable and objective light.
Next, you will want to develop a 5 year proforma to show the potential buyer what he might expect in the coming years. A word of caution – If you paint too rosy a picture, the potential buyer may use it to his advantage and tie your exaggerated projections to an earn-out.
Finally, you’ll want to prepare a complete list of all the furniture, fixtures, and other tangible assets with their market price.
When it comes to the marketing plan, you will want to add any independent research about your industry to educate potential buyers who may not be very familiar with your industry.
When it comes to the operational plan, you may want to include bios and images of the key members of your business.
As an appendix to the CBR document, you will want to include pictures of your office, key assets, and other images that will give the potential buyer a better idea of your business.
Once the CBR document is complete, you will want to create a one-page executive summary that you will use as a flier. You will want the executive summary to include key financial and other information that will attract a potential buyer. However, your executive summary should not disclose enough about the business that anyone can track it back to your company. You need to be vague enough to avoid inadvertent disclosure yet convey enough tantalizing information to make the potential buyer want to sign a nondisclosure agreement (NDA) to get your CBR document. Therefore, in the scheme of things, you make the executive summary a publicly available document and use the NDA as a gate to your CBR document.
Once your marketing materials are produced, it is a good idea to make copies of all contracts, agreements, financial records, corporate governance documents, tax returns, policies, etc. and assemble a due diligence box.
Have you prepared the documents required to make a buyer feel like he has all the facts to make a decision?
