Selling Your Business to a Family Member or Friend
A business broker plays an essential role in helping you sell your business even if you already have a family member or friend in mind as the potential buyer. A business broker will guide you through the process, ensuring the transaction and hand off goes smoothly. The role of a business broker in this type of transaction is the same as any other buy or sell transaction, except the search for a buyer is deprioritized from the process because you have already found one that may get to the finish line. However, family, friend or third party, the likelihood of closing the deal with the first buyer that makes an offer is low. Therefore, a business broker will, with your permission, actively market your business to other potential buyers as backup plans A, B and C. A trusted family member or friend can be the ideal buyer in many situations, but the process and responsibilities of a business broker remain for the most part, unchanged.
Assuming your family member or friend is the right buyer, your business broker can focus on getting your business ready for sale, as well as taking the buyer through the steps necessary to purchase your business. The first step in any transaction is to prepare a business valuation to obtain a starting price to support you during negotiations. This is meant to give you a baseline so that you understand the value of your business.
The next couple steps involve the buyer and getting them informed and prepared to make a deal. For backup buyers, the business broker will screen them to ensure they are financially and experientially qualified. All buyers at this stage will be required to sign a Confidential Agreement (CA) or a Non-Disclosure Agreement (NDA). A business broker will then present the buyer with a Confidential Information Memorandum (CIM) or Confidential Business Profile (CBP) that includes details about your company such as history, financials, and cash flow. This document will provide the buyer with the information needed to analyze your business and help them make a decision on whether it is the right business opportunity for them. A business broker will obtain the buyer’s signature on a Non-Disclosure Agreement before handing over any confidential information, including the CBP.
Moving the sale along from here, a business broker will guide the buyer(s) through California Business Advisor’s (CBA) proprietary Agreement to Purchase document that serves as the Offer. They facilitate the negotiations and advise the Seller on different deal structure and term options. Business Brokers also work with each party’s advisors such as Attorneys and CPAs as well as neutral parties to the deal including Closing Attorneys and Escrow Agents to prepare the Definitive Purchase Agreement and other important closing documents.
Business Brokers at CBA also introduce buyers to our in-house lending advisors as well as third-party lending partners who aid the buyer in securing financing whether it be through a conventional loan, a Small Business Administration SBA Guaranteed loan or other creative financing options such as Roll Over Business Start Up Program (ROBS).
A business broker handles the menial tasks that you as a business owner do not want to take time away from running your business to complete. Establishing a timeline, monitoring the meticulous due diligence process, working with the landlord to get a new lease agreement, contacting an attorney for closing documents, and handling contact between parties are all duties that a business broker will take on. Other important documents Business Brokers organize include seller notes, security agreements, bill of sale, UCC Financing Statements and other state required disclosures.
Having a known buyer before you start the selling process is an excellent way to speed it up, if done the right way. A business broker ensures you can capitalize on the fact that you already have a buyer in mind as they guide both parties through the complicated process. A business broker alleviates the stresses and complications that accompany selling your business and allows you to continue running it effectively during the sale process. If you are thinking of selling to a family member, friend, or colleague, contact a business broker to have all your questions answered.
Be prepared and become informed about your most valuable asset and seek a business valuation with CBA today. Click here.