What are the 9 steps in sales process?
This article is based on my experience with business brokers and entrepreneurs who have called me for help in finding buyers or sellers for their business. I will cover what a typical call would be like between two parties that want to discuss buying your business. Please note this is not legal advice but only general information about how things go when you need an intermediary such as a broker. This is also meant to give potential buyers/sellers some idea of where they stand at each step so they can better plan ahead for success (or failure). If you're looking for more comprehensive information please see our books on How To Sell Your Small Business Or Exit from it. I hope it helps!
Step 1: Introduction / Meeting
This first meeting should be very brief. Both sides should introduce themselves and state why they think they might benefit from talking together. You may find that one party has no interest in doing business with another party, however there could still be common ground. For example if both parties want to sell their companies because they feel overworked or overwhelmed then perhaps the goal is the same and working together makes sense. It's important for us intermediaries to know whether we are being asked to facilitate a merger or acquisition or simply trying to make someone aware of a buyer/seller opportunity. We can't waste time listening to long introductions unless it is clear which side wants to talk further. A good rule of thumb is to ask questions early to determine if there is any overlap in goals or areas of expertise.
You'll probably get a phone number back out of that conversation and set up a second appointment. When setting up your next appointment try to book within 2 days rather than waiting around forever. Make sure the date works well for everyone involved, otherwise you risk losing either party. Also remember that people often change their minds or take longer than expected to decide. Sometimes weeks pass before they even contact you again after they've made up their mind. They may have decided to pursue other avenues at that point. Don't worry though keep following up with them until they tell you otherwise.
Step 2: Discovery Phase
During discovery phase you'll work closely with your client to figure out exactly what they want and don't want. One thing you'll learn during this phase is whether your customer really needs your product or service or just wants to buy it. In addition you'll gain insights into your customers' current situation and challenges they face. Often times during discovery phase your clients will begin asking questions about your company in hopes of learning enough about you so that they can present offers later. Be prepared to answer those questions now since it shows confidence on your part that you actually do know something about your own industry. And while answering these questions may seem uncomfortable, it's usually best to be honest since your future depends upon building trust with your new partner.
Also during discovery you'll likely hear many "weird" ideas regarding how things could potentially be done. Many investors, advisors and bankers like to throw out crazy concepts during initial meetings hoping to spark innovation and creativity in prospective partners. Unfortunately most of these ideas never pan out, yet sometimes lead to great breakthroughs. So don't let yourself be intimidated by strange ideas. Take notes on everything you hear and consider all possibilities. Remember that if you end up choosing to move forward with anything you heard, you must disclose it immediately. Otherwise you run the risk of having the deal collapse once financing comes along.
Step 3: Presentation
Now its time to put everything on paper. During presentation you should provide a detailed overview of your company including financial statements, products and services offered, marketing plans, etc. While providing this information it's wise to include a summary table of contents showing highlights of your business and compare against similar competitors. Then briefly describe strengths and weaknesses relative to competition. Some examples of topics you'd address include growth prospects vs. competitive threats, market share, profit margins, strategic alliances, key personnel, management team, intellectual property, patents, trademarks, copyrights, contracts, leases, inventory, equipment, liabilities, insurance policies, pending litigation, government regulation, tax issues, compliance requirements, employee benefits, labor costs, overhead expenses, taxes, exit strategy, cash flow projections, value proposition, long term vision, projected earnings, ROI calculation, return on investment calculations, valuation analysis, breakups, recapitalizations, leveraged acquisitions, mergers and consolidations, joint ventures, partnerships, licensing agreements, vendor lists, cost reduction programs, asset stripping, corporate restructuring, etc...
Step 4: Negotiation
Once you've provided a thorough description of your business it's time to negotiate. Here you'll attempt to come to terms on price, structure, assets, liabilities, timing, performance measures, and contingencies. Depending on your type of business and size of transaction different types of negotiation styles will apply. However here are some basic guidelines to follow. First always avoid saying yes right away unless you intend to say no. Second, agree on milestones and deliverables. Third, be reasonable and flexible without appearing desperate. Fourth, use humor whenever possible. Fifth, don't offer too much upfront money. Try offering 20% down plus closing fee instead of putting all the money up front. Sixth, listen carefully and repeat back everything said. Seventh, don't ever hesitate to walk out if negotiations become heated or stalled. Finally, always send written confirmation letters stating specific dates and conditions agreed to during negotiations.
Step 5: Due Diligence
Due diligence is basically making sure your new partner won't steal your lunch money. As mentioned above you should expect to receive detailed descriptions of every aspect of your business including financial data, product line, employees, vendors, contracts, lease obligations, inventory levels, receivables, payables, and maybe even confidential documents. Ask lots of questions. Most importantly verify facts and figures presented by your partner. After reviewing due diligence reports you should be able to determine whether your deal appears realizable. Is the person proposing the partnership credible? Are his claims backed by solid evidence? Does he have the resources to execute his promises? Do you have adequate protection in case of fraud? Have you received copies of signed non-compete agreements? What happens if you lose funding? How does this impact your suppliers? Can you afford to continue operating under the proposed arrangement? Has anyone else been through this exercise before? Could you bring this proposal to your board? Shouldn't you consult your attorney first? Once you believe due diligence confirms you're ready to proceed you'll sign purchase orders and prepare a Confidentiality Agreement.
Step 6: Closing
After completing due diligence and signing Purchase Orders, you'll meet with your lawyer to finalize details and draw up necessary documentation. At this stage you're essentially handing control of the entire transaction over to your banker, lawyers, accountants, payroll consultant, IT department, HR staff, public relations firm, consultants, auditors, and others. Now you need to focus on running your business until final closeout.
Step 7: Transition
Now that you've completed the actual transfer of ownership you may have to wait awhile before receiving your last paycheck. Hopefully you've hired competent professionals to handle the transition, but you may still have to personally oversee certain aspects of the closing. These tasks include preparing accounting records, distributing stock options/awards, terminating existing employee welfare benefits, and settling outstanding accounts payable. Make sure you stay in touch with your accountant throughout the year to ensure proper record keeping. It's also vital that you remain physically available during this period in order to respond quickly to any problems that arise.
Step 8: Post Closure
As soon as you complete the sale, you're free to enjoy life. But beware, you may wake up one morning to discover that somebody stole your office safe. That's happened to me several times. On the bright side, you can rest assured knowing that nobody got away with your secret recipe for world class chili con carne. Anyway, it was worth taking precautions. Just kidding. Sorta. Although post closure is pretty low stress it's still critical that you maintain confidentiality, protect trade secrets, and safeguard proprietary processes. Keep your doors locked, fire alarms operational, and guard sensitive files with security guards.
Step 9: Bankruptcy
If your business fails, gets sold, shuts down, goes bankrupt, whatever you choose to call it, you owe it to yourself to file bankruptcy paperwork with the court. Why? Because filing bankruptcy puts your creditors on notice that you're serious about getting out of debt fast. Creditors will look at your bankruptcy petition and realize that paying off debts is far preferable to continuing to lend you money. This means less headaches for you going forward.
Well that wraps up our discussion of nine steps in the sales process. Hope you found it helpful! Feel free to leave comments below. We love hearing feedback from readers. Thanks for stopping by.
There is a popular saying that goes "You don't have to sell your soul-you just need to sell your product". While this may be true for many products and services, there are times when you do have to sell something more than simply what's on offer. In particular, if a business owner wants to exit his or her business, they will usually require an intermediary to help them through the sale process. This article will describe how a typical business can go about finding its buyer(s) using a nine step sales process.
Step 1: Determine who has the money and desire to buy your business
This first step involves determining whether any potential buyers exist at all. It requires looking into existing financial statements like balance sheets and income statements (if possible). If no interested parties come forward after making contact with local banks, accountants/tax preparers, investors, etc., then it may make sense to consider trying other methods of selling such as putting up your business for auction online.
If someone does express interest in buying your company, however, then you'll want to move onto the next step...
Step 2: Prepare a written summary of your business' strengths and weaknesses
In order to determine which areas of your business are most attractive to potential buyers, you must conduct some due diligence regarding your operation. You should spend time talking to current employees and customers, reviewing financial reports, interviewing previous owners, etc. By doing so, you'll gain insight into your own performance and those around you, allowing you to develop a picture of both positive aspects of your business as well as challenges facing the new ownership group. Once you've completed this research, you should compile these findings into a document called a SWOT analysis. A SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Simply put, it provides prospective buyers with information about your business which allows them to formulate their own vision for improving upon certain elements while avoiding others. For instance, a buyer might realize that he or she would benefit from having greater control over marketing decisions because of poor advertising efforts, whereas another investor might decide not to take the risk associated with investing in a startup without being able to see a track record of success.
Once you've developed a list of positives and negatives related to your business, you're ready to begin contacting potential buyers...
Step 3: Identify target companies and individuals within each industry
Once you know where to look, you can identify specific entities that could potentially purchase your business. These targets may range from large corporations to smaller groups of shareholders. However, you should keep one thing in mind--that size doesn't necessarily dictate value! There are numerous examples throughout history of small startups growing much faster than larger competitors despite only holding a fraction of the market share. Therefore, focus less on overall size and revenue numbers and instead think more along the lines of growth projections, profitability, management experience, etc.
As part of identifying suitable buyers, you should also gather as much data as possible concerning each entity's operating budget. Without knowing exactly how much money each party involved has available to invest in purchasing your company, you won't be able to accurately estimate the total price tag of the transaction.
Now that you've identified potential buyers, the next step involves actually reaching out to them...
Step 4: Contact interested parties and present your proposal
After completing the necessary background checks, you'll now start approaching people within industries similar to yours in hopes of securing financing to acquire your business. To help facilitate things, you'll probably find it useful to create a targeted mailing list containing the names and addresses of anyone who seems remotely qualified. Don't worry too much about sending unsolicited mailings--it's better to get rejected once rather than never! Also remember that if you plan on going door-to-door, you'll want to dress professionally and act friendly but professional. Be prepared to answer questions honestly and avoid giving vague answers. After all, nobody likes surprises!
When making initial contact with prospects, you should try to establish rapport quickly. People tend to become defensive during negotiations, especially if they feel pressured to complete everything immediately. Try to build trust by offering samples of your work or demonstrating expertise in your field. Another good idea would be to meet with them personally and give away free consulting sessions. When meeting face-to-face, you'll want to wear appropriate attire and bring copies of your documents for reference purposes.
Next, you'll want to ask some basic qualifying questions to ensure that the person or company represents themselves correctly...
Step 5: Conduct a thorough evaluation of each candidate
Before committing to anything, you'll need to thoroughly evaluate each individual prospect to determine whether he or she truly holds enough capital to fund the deal. As mentioned earlier, you shouldn't rely solely on general statistics like gross revenues and net profits since they don't always paint a clear picture. Instead, you should request access to the actual bank accounts, tax returns, profit margins, etc. Of course, you should also verify references provided by candidates to confirm reliability.
It's important to note that although you should treat everyone fairly, you aren't obligated to accept every bid. If you receive multiple offers from different buyers, you'll need to weigh options based on the merits of each case. One way you can accomplish this is by creating a matrix listing each bidder against each other. Then place figures under columns representing various attributes like location, age, ownership structure, etc. Finally, fill in corresponding rows with ratings ranging from 1 to 10 indicating how desirable each attribute appears to be. Once you've established criteria for judging bids, compare results across bidders until you reach consensus.
Another option would be to use a bidding calculator to figure out the exact amount needed to close a given deal. Bidding calculators allow users to plug in values relating to assets, liabilities, equity, earnings before taxes, cash flow, etc. to arrive at the maximum acceptable offer. From here, the tool generates an estimated valuation report showing the price per share offered by each bidder. Although bidding calculators provide easy estimates, they generally don't factor in key factors such as intangible assets, future contracts, etc. Since you'll ultimately need to negotiate terms with your chosen buyer, calculating costs yourself gives you more flexibility and guarantees you'll earn the highest total return.
Even though you should strive to maintain confidentiality whenever feasible, you should be aware that sometimes circumstances force sellers to reveal confidential details even outside the context of formal negotiation meetings. Before sharing sensitive information, you should discuss ways to protect yourself legally. Otherwise, you run the risk of damaging relationships between buyers and sellers, violating privacy laws, or running afoul of anti-trust regulations.
Finally, assuming you choose to proceed further towards closing the transaction, you'll likely encounter resistance from certain stakeholders. Next...
Step 6: Deal with objections and counter proposals
Although most deals eventually end successfully, occasionally problems arise. Even the best laid plans can fall victim to unforeseen obstacles. Fortunately, dealing effectively with setbacks often isn't very difficult. For starters, you should remain open minded to changing conditions and willing to compromise. On top of that, you should pay attention to details to prevent misunderstandings later down the line. Make sure you understand what you agreed to beforehand and stick to deadlines. Keep records of conversations and follow up accordingly. And lastly, don't forget that sometimes the solution lies in moving ahead anyway...
Step 7: Close the deal
At long last, your hard work has paid off! Now comes the exciting final stage of actually acquiring the business. Depending on the type of sale you're attempting, there are several viable approaches including merger, acquisition, asset transfer, stock exchange, bankruptcy, dissolution, etc. Regardless of method, you'll still need to perform extensive documentation procedures and review legal agreements prior to signing anything. In addition, you'll also want to consult your attorney regularly to check for accuracy and completeness. At this point, you should expect to receive a binding contract signed by all parties. Afterward, you'll submit the agreement to a judge for approval. Once everything is finalized, congratulations! You've officially sold your business...or haven't you??
One common pitfall that inexperienced entrepreneurs frequently trip up on is rushing through paperwork. Don't let haste blind you to critical errors! Take your time and carefully read all proposed contracts, schedules, and other relevant materials to ensure nothing gets overlooked. Remember that a lot rides on getting everything right, so take extra care to avoid costly mistakes.
Congratulations again! Your business is now owned by your new partners, directors, etc., and you deserve recognition for guiding the transition smoothly. Most importantly, enjoy the fruits of your labor!
What are the 10 steps of the selling process?
1. Determine if anyone expresses interest in buying your business
2. Prepare a written summary of your business' strengths and weaknesses
3. Identify target companies and individuals within each industry
4. Contact interested parties and present your proposal
5. Evaluate each candidate
6. Ask probing questions to qualify each individual
7. Create a table comparing each bidder
8. Compare results across bidders until you reach consensus
9. Close the deal
If you're looking for an overview of what's involved with selling your business, this article is for you! It'll give you some insight into how to sell a small business and will help you understand what happens during each step. This post covers what the typical sale involves from start-to-finish and includes important details such as who does what tasks at every stage. Keep reading to learn more about what it takes to successfully sell your business...
What Are the Steps In Selling A Small Business?
Selling a small business requires time and effort on behalf of all parties involved. There are many things that have to be done before, during and after the actual deal closure. From drawing up contracts and agreements to preparing reports and statements, there's a lot to do if you want to maximize value when selling a company. Here are the nine key stages involved in most deals (including any necessary paperwork).
1) Discovery Phase
This phase begins once someone expresses interest in buying your business or makes contact through email or phone call. You can use discovery questions to find out information like why they'd like to buy your business, whether they've had experience running similar companies, their budget and other pertinent data. When using the discovery question method, keep these points in mind:
Stay away from asking "yes" and "no" questions. They don't tell you anything useful about the person contacting you. Instead ask open-ended questions so you get real answers. For example, instead of saying "Will you consider my offer?" try something like "Tell me about your situation." Or, instead of asking "Do you think we could work together?" say "How would our working relationship play out over time?"
2) Evaluation/Analysis Phase
In order to determine which type of entity should best suit your needs, you need to evaluate potential buyers' strengths and weaknesses. Evaluating them also helps you decide if you even want to pursue the opportunity further. Ask yourself questions about their background, history, goals and motivations. Try to figure out how they see themselves in five years and then compare those visions with yours. Also take note of their financial capabilities, assets and liabilities.
3) Negotiation/Conversation Phase
During negotiation phase, you'll discuss terms and conditions of the agreement, including price, ownership percentages, profit sharing, etc. If possible, sit down face-to-face with the buyer(s) to negotiate directly. Otherwise, use emails, texts, conference calls and Skype. Be sure not to make major decisions without discussing them first with your lawyer. Take notes throughout the conversation so you won't forget crucial info later. And remember -- always put yourself in the shoes of the buyer. Why would they care enough to meet with you personally? Don't assume they know everything because they probably don't.
4) Due Diligence Phase
Due diligence refers to legal checks related to transaction completion. These include analyzing financial documents, conducting interviews, checking references and doing research on previous clients. During due diligence, you must ensure that both sides thoroughly investigate the business being sold and its current state. That way you avoid getting stuck paying for services already rendered or having problems collecting money owed to third parties. As part of due diligence, prepare detailed contract packages that clearly outline responsibilities between the seller and purchaser. Make sure everyone signs off on these documents beforehand, so nothing gets forgotten later on.
5) Contract Signing Phase
Once the seller agrees to certain terms within the contract package, he or she has to sign off on them. Once signed, the document becomes legally binding and officially transfers ownership rights to the new owner. After signing, you may receive multiple offers but only one final bid is accepted. So choose wisely and carefully review these bids closely. Find people who possess strong negotiating skills and trustworthiness.
6) Transaction Completion Phase
At this point, the buyer usually pays earnest money deposit towards closing costs and fees. Then, depending on whether the deal goes through, either party might hire professionals to handle different aspects of the transaction. Closing typically occurs six months to a year after initial discussions begin. At the end of this period, the original owners no longer hold any power in regards to day-to-day operations.
7) Post Sale Transition Phase
After several weeks pass, the transition team is responsible for settling accounts and transferring ownership. However, since the transfer didn't occur automatically overnight, it may take awhile for employees to leave. Depending on where you live, however, taxes still apply until the purchase closes. Therefore, it's very common for sellers to pay back large tax bills right after the sale. Meanwhile, the buyer assumes control of daily operations, hiring his own staff and accounting department.
8) Ongoing Relationship Phase
Now that the deal is complete, it's time to focus on growing the newly formed organization long term. Since the primary goal was to generate maximum revenue, look forward to future growth opportunities. Think creatively about ways to increase profits while maintaining quality standards. Look for areas where you can improve efficiency and streamline processes. Over time, you may discover room for improvement in other departments too. With continued success, the company eventually reaches milestones called breakaway periods where profitability increases dramatically. Those times represent ideal windows of opportunity for investors seeking short-term returns. But beware: Breakaway periods can last anywhere from days to years, depending on specific circumstances.
9) Exit Strategy
When operating under normal market conditions, the majority of small businesses fail to reach breakaway periods. Even if they do, though, they often run out of capital needed to sustain exponential growth rates. To prevent this scenario, exit strategy experts advise entrepreneurs to create plans for exiting their businesses quickly. In case revenues fall significantly, or if unforeseen external factors cause setbacks, they suggest creating options for liquidating shares in the company or selling it outright.
That wraps up the basics of the sale process. Now all you have left to worry about is choosing the perfect buyer, making sure the deal stays private, staying true to your values and protecting personal privacy. Just follow these basic guidelines and you'll be well prepared when selling your business. Good luck!
What Are the Steps In Selling A Large Business?
There are differences in the size of business transactions. While the above explanation provides general guidance on the sales process, here are additional tips specifically designed for larger enterprises.
1) Identify target audience
Before you jump into planning and executing a massive marketing campaign, spend a little bit of time figuring out exactly whom your product appeals to. What kind of customers would benefit the most from your offering? Is it high school students interested in entrepreneurship? Maybe college graduates who just graduated and are starting out in life. Perhaps it's senior citizens who need extra income. Whatever group you aim to attract, define a niche and stick to it.
2) Create brand image
A successful brand identity attracts consumers instantly. One reason behind this phenomenon is because branding represents more than just products and services. Branding encompasses a host of emotional elements, ranging from personality traits to corporate cultures. Plus, people tend to feel emotionally connected to brands. Therefore, make sure your brand image reflects your core values and mission statement.
3) Build a website
Since websites are easily accessible 24 hours per day, 7 days per week, online presence plays an essential role in reaching prospective customers. Whether you're trying to establish credibility among competitors or simply promote your offerings, a functional website serves two purposes. First, it allows visitors to browse relevant content and locate your products. Second, a site functions as your virtual storefront, allowing them to place orders and inquire further about items they wish to purchase.
4) Develop social media profiles
Social media sites provide another avenue to showcase your goods and services and build relationships. By developing pages dedicated to your industry, you gain greater visibility and connect with potential clients across various platforms. Facebook, Twitter and LinkedIn are extremely popular channels for promoting your products.
5) Drive traffic to your storefront
As mentioned earlier, internet users love convenience. Because of that, it doesn't hurt to advertise your location via search engines. Google Maps, Bing Local and Yahoo Directory allow you to insert links to your website and display street addresses. Furthermore, you can utilize free online advertising tools available through Google AdWords, Bing Ads and Yelp.com. Simply fill your profile page with keywords pertaining to your industry, and watch the number of clicks trickle in.
6) Get feedback from customers
While building your web presence, test promotions and strategies with beta testers. Use surveys and comments sections to gather valuable insights, especially regarding customer satisfaction levels. Such findings will enable you to fine tune your service or product accordingly.
7) Run promotional campaigns
To boost awareness and drive conversion rates, plan and execute targeted ad campaigns. According to recent studies conducted by Hubspot, 72% of marketers believe paid ads produce better results compared to organic posts. However, you shouldn't rely solely on paid methods. Rather, mix paid and unpaid efforts to achieve optimal outcomes.
8) Manage negative reviews
Although negative publicity is inevitable when dealing with imperfect human beings, you can minimize damage caused by dissatisfied customers. Respond promptly whenever a complaint arises, taking action immediately rather than waiting till the issue escalates. Maintain transparency by providing full disclosure about problem resolution policies. Additionally, address complaints publicly to show you truly appreciate consumer concerns.
9) Analyze performance metrics