One of many lessons learned after almost 20 years in the restoration industry is the need for crystal clear communication. When first considering a sale, you have three choices:

• Do nothing, letting death cover the details.
• Wait until the last minute, then hope for the best.
• Prepare for the sale, planning for the best.

Regardless of your choices or path, fast forward, you’re now ready to exit. Now what?

At this very moment, you likely genuinely wish your choice years ago was “preparation.” Nonetheless, dozens of questions surface surrounding the following: business value, taxes, deal structure, timing of the sale, estate planning, confidentiality, who helps, the premise lease, key employee contracts, etc. The list goes on.

Now you’re in need of answers. Here are answers to seven questions asked from virtually every business owner:

1. What is my business worth?

No blanket answer of course, as every business is different. However, the real questions should be:

• “What’s included in the sale?”
• “What happens to the cash, AR’s, AP’s, WIP and the long-term debt?”

Business ‘worth’ is a necessary number, but far more meaningful if it’s clarified. You ultimately want to know what you get to keep after closing, and all taxes/expenses have been paid.

2. When should I sell?

It’s easy enough to determine most variables surrounding a sale. However, timing is always key. This answer is intimately personal to you and your family, including discussions surrounding: net worth, health, knowing who you are without your business, energy levels, outside hobbies, children/heirs in place to take over, and more.

In a broad sense, business values are like stocks- when times and trends are good, it’s more desirable and value goes up. When times are bad, risk goes up, desire and price decline.

3. How long does it take to sell my business?

Most restoration related companies will take eight to 14 months to sell. Some a bit longer depending on size, location, and business related details. For your sanity, plan on 10 – 14 months; anything sooner is a bonus.

4. How do I keep it confidential from employees and the industry?

Simple: nobody tells them until the deal is done. All communication is 100% confidential between you and the potential buyer. Site tours with buyers are done after hours or on weekends. If done during business hours, identities are concealed. Many sales are 100% confidential to all employees.

That said, companies may have a handful of ‘key’ employees that a buyer and seller want to protect with Key Employee Contracts. After signing confidentiality agreements, these employees are made aware of the sale just prior to closing.

5. Can I be cashed-out? Or, do I need to carry some paper?

In virtually every instance, expect to carry some paper. The question then becomes “how much and when is it paid?” Many disaster restoration sales below a $5 million transaction price are backed by the SBA, expecting between 20 – 30 percent down, split between the buyer and seller.

For example, if the SBA requires 30 percent, the buyer would need a 15 percent down payment, and you’d carry a 15% Seller Carry Back Note (SCBN). Thus, at closing you would receive the bank’s 70 percent loan, plus the buyer’s 15 percent down-payment, or 85 percent of the sales price. Typically, you would also receive your cash and AR’s, less your AP and long-term liabilities. It is important to note- the terms of your SCBN needs to match the terms of the bank’s loan; currently 6.5 - 7.5 prtvrny interest, at either three, five, seven, or 10 years, depending on the dollar amount.

6. How do I handle my premise lease?

One of three things commonly occurs with the lease:

• It can be assumed by the buyer, as is. This is rare as lenders need the lease term (or options) in place for the duration of the buyer’s loan.
• It can be assumed with negotiated options added to the current term, satisfying the lender’s requirements (most common).
• The buyer and landlord entirely renegotiate lease prior to closing.

7. How long will I need to stay and train a new buyer?

Depending on the experience of the buyer, sellers can expect to train anywhere between four to six weeks (smaller companies), up to six to eight months (larger companies). Occasionally this can stretch to nine to 12 months. (For longer periods, some compensation is typically included.)

Any advisor (close to you and your business) will recommend key decisions should not be made until fundamental answers have been provided. As Jim Collins states in Good is Great, “You absolutely cannot make a series of good decisions without confronting the brutal facts.”

Three Sales Options (Two Good Ones)

When the decision is made to sell, historically there have been two choices: hire a broker/advisor, or sell it yourself. The first can be expensive; the latter is thrifty, but terrifying.

However, there is a third option combining the best of both, it’s called BrokerAssist. This choice offers the constant advice, direction and assistance of a broker/advisor throughout the entire process. It requires a bit more involvement from you (a couple hours a week), but at a fraction of the cost. Savings are 75 – 85 percent of normal fees, equaling tens or hundreds of thousands of dollars.

Your confidence and peace of mind will remain strong, knowing details are handled properly and professionally. This helps ensure the ultimate goal, a successful sale and exit.

Ill-Advised Strategies

History indicates a few sellers are intimidated by details surrounding a sale. Though unnecessary, apprehension follows, then avoidance. The result can be ill-informed decisions such as:

• Waiting and hoping for the right buyer to just walk through the front door.
• ‘Putting the word out’ through industry channels that you’re “thinking of doing something different.”
• Approach a competitor without first understanding the pros and cons.

With minimal effort and resources, ill-informed decisions can easily be avoided.

Recap

It’s fact that the remediation/restoration industry is extremely complex and demanding. You’ve already mastered thousands of hurdles and details. You’ve done the hard part! With so much at stake, a few additional questions and details surrounding your best exit will not be as intimidating as you might think.