02 Oct Selling Your Business: How the Closing Process Works
So, you’ve found your broker, found your buyer, and negotiations have gone successfully. You are almost ready to cross the finish line and seal the deal with the sale of your business. It is now time to bring this transaction to a close. However, like most business owners who have never sold their business before, this part of the process will be a complete and total mystery. In this post, we will go through the process of the close of a business sale and how your broker is indispensable to this process.
When making the written offer through the business broker, all information provided is assumed to be correct; but it includes contingencies which confirm such information. If outside financing is needed, the business broker can provide a list of sources and a contingency to receive financing by a certain date. If any contingencies are not met by the written date, the offer will be void.
Once a sales price is agreed upon and the offer is accepted, a period of due diligence confirms the validity of the offer. No information should be withheld from the buyer at this point. The buyer should look for any red flags in cash flow and any hidden problems. Although the business broker can guide a buyer through the process, he/she cannot give legal or accounting advice; so, it is good to have an attorney and an accountant to answer questions or give advice. They can also give advice for selecting the best legal entity for the business. It is important to contact the owner of the building and start the lease preparation as soon as possible, as this sometimes takes longer than expected.
For closing, it is usually advantageous for both the seller and buyer to have documents prepared by an escrow attorney, based upon the agreement signed by the buyer and seller. Both parties may then have the documents reviewed by their own attorneys, if they desire. This is usually much less expensive for the buyer and seller. After closing, the buyer receives the keys to the business and starts making money immediately. The buyer and seller meet with the employees at the business to announce the sale and assure them their jobs will remain the same. The sale is not disclosed to the employees, customers or anyone until after closing to prevent inaccurate information from getting out that could hurt the business. As part of the purchase agreement, the seller will work with and train the buyer for a determined amount of time and assist in an orderly transition. Suppliers will be notified of the change of ownership, utilities changed, licenses and permits changed, and a bank account opened if not done before closing. The business broker will guide the buyer through everything.
If you’re ready to sell your business, these steps are necessary, and will help you find a broker with years of experience to help execute your sale. A great way to begin this process will be to contact Moche Hazout at Transworld Business Advisors today!