A Business Sale Chronology(Part 1)

A Perpetual Business Case Study:  New York Business Sale Chronology

Selling a business, whether an outright cash sale (rarely happens) or creatively transitioned (our specialty) requires time!  The more the better!!

At https://blog.perpetualbusiness.co/ we've discussed the attributes of a business always ready for expansion or sale, valuation metrics, financing options, transition details, personal considerations, and so much more; in this post we’re sharing an actual case chronology to help you understand succession in real life. This project began in May 2015 and the purchase agreement closed in September 2016 (16 months).

This case is an automotive repair shop that opened in 1983 on property owned by the sellers. The business has six employees.  It is representative of many small businesses.  The owners/sellers: husband 64, wife 61.  The buyers: key employee 31, wife 29.  The key employee has 14 years experience in the industry, 4 years working with the owners.  The parties are impressed with one another and desire to find a perpetual business solution.

May 2015 – First conversation with owners.
June – Three more conversations about concepts, process, fees.
July – Services contract signed.  The transition project officially begins with Step_1: Discovery.

Discovery is the foundation for the entire engagement, comprised of interviews, questionnaires, and financial statements from all parties and an online ownership fit assessment of the prospective buyer.  Our findings are summarized in a written report to the owners, followed by a conversation about whether sufficient confidence exists to proceed, now that we know the capabilities, resources, and limitations of the parties.

August - Step_1: Discovery completed.

The buyers are capable, responsible, dedicated, and passionate to become business owners.  They will not have a down payment. The owners value their key employee and believe the buyer team has a high probability of success.  We jointly decide to begin Step_2: Valuation.  (Only the business is being sold at this time. The real estate will initially be leased, and then sold in a later transaction after the business purchase obligations have been satisfied).

September – Valuation completed, indicating $258,000.  The owners approve the value; share it with the buyers, who then discuss it privately with me.  The parties agree on a price of $250,000 and concur that they wish to move to Step_3: Financing options.

October – Several financing illustrations are submitted.  They are reviewed by the owners and discussed with us multiple times. Since the buyers do not have a down payment, much of the discussion revolves around the possibilities of success, failure, and contingencies.  In late October, the owners shared their preferred financing illustration of an 8-year equity accumulation plan with the buyers.  The parties agree to the 8-year financing plan and request the final stage, Step_4: Letter of Intent (LOI).

Our four-step process is a defined, deliberate, and methodical process for succession success. We will outline how the parties completed this transition in our next post "A Business Sale Chronology- Part 2".  Regardless of your age or time in the business, you can start your own process today with our video instructional: https://perpetualbusiness.co/product/perpetual-business-basics.