Mergers & Acquisitions

The Art of the Exit

The Complete Guide to Selling Your Business

Written by Jacob Orosz, President of Morgan & Westfield

Less than a third of businesses on the market actually change hands. So what does this mean for you? Think about it — with a significant amount of your wealth tied up in your business, planning your exit is one of the most critical decisions you’ll make.

The Art of the Exit contains winning strategies I’ve learned from 20 years in the trenches selling businesses. This definitive guide is broken down into 10 simple steps from preparing your business for sale to orchestrating the closing.

What’s Covered in the Book

Statistics on how long it takes to sell a business

A concise breakdown of the most common valuation methods and concepts

A framework for helping you decide whether to sell your business

Lessons learned for building a highly sought-after business based on dealing with thousands of buyers

Advice on building your deal team – including an attorney, broker, and M&A advisor

Guidance on informing and retaining your employees

A simple yet effective model for increasing the value of your business

Recommendations on financing the sale and minimizing the risk of a default

A synopsis of the four types of buyers, what they’re looking for, and their goals

Tips for maintaining confidentiality throughout the process

A prescription for maximizing negotiating leverage

A detailed analysis of the letter of intent and its key clauses

A strategy for maximizing the price and terms

Advice on preparing for and minimizing risk during due diligence

Tips for negotiating the purchase agreement and transaction structure

10 Steps to Selling Your Business

1. Prepare

Preparing Your Business for Sale

2. Value

Valuing Your Business

3. Finance

Financing the Sale

4. Team

Building Your Team

5. Buyers

Knowing Your Buyer Types

6. Market

Marketing Your Business for Sale

7. Meetings

Meeting with Buyers

8. Offer

Negotiating an Offer

9. Due Diligence

Conducting Due Diligence

10. Closing

Managing the Closing

Overview

Selling a $500 million company requires an entirely different process than selling a small to mid-sized business. This handbook contains essential tips for owners of both Main Street and lower middle-market businesses valued at $500,000 to $10 million. These contractors, wholesalers, service companies, manufacturing businesses, technology startups, and other small businesses with fewer than 500 employees are the backbone of our economic engine.

This size range also tends to be a no-man’s-land for business owners when it comes time to sell. That’s because most business brokers work on smaller transactions, while investment banks are accustomed to handling larger transactions. Another challenge for businesses of this size is that the potential purchaser can be either an individual or a corporate buyer such as a competitor, private equity firm, or other company. The problem here is that the marketing strategies, negotiating tactics, and processes can vary significantly depending on the buyer most likely to purchase your business.

Twenty years ago, when I began helping entrepreneurs sell their businesses, I scoured the market for useful information. In doing so, I discovered that most of the available literature didn’t address the real-world problems I encountered. Rather, it was theoretical or directed at large, publicly traded companies. Whether you’re searching online for general advice or browsing books for specifics, it’s difficult finding valuable, actionable information for companies in this size range. And that is exactly what The Art of the Exit provides. This book is loaded with proven strategies on the art and science of selling any business. I walk you through the entire sales process from preparing your business for sale to the closing and reducing risk every step of the way. You’ll receive solutions and proven guidance based on decades of helping entrepreneurs sell their businesses for top dollar.

The sale of your business will be one of the most stressful events in your life. Don’t go it alone. Rest assured that you’ll receive sound advice based on proven results.

Order your copy today.

Questions Answered in This Book

How long will it take to sell my business?

How do I value my business?

How do I maximize the price?

How do I prepare my business for sale?

Should I finance the sale? What if the buyer defaults?

What professionals do I need to hire, and what do they charge?

Should I tell my employees about the sale?

How can I keep my employees from leaving when they find out?

Who is most likely to pay top dollar for my business?

How will a broker or M&A advisor market my business for sale?

How do I keep the sale a secret from my employees, customers, and competitors?

How do I make sure a buyer is serious before I share sensitive information?

What tricks can I use to maximize my negotiating leverage?

How can I prepare for due diligence? What can go wrong?

What clauses should I look out for in the purchase agreement?

Table of Contents

Introduction

  • The Decision To Sell
  • How Long It Takes To Sell
  • Note on Exceptions and Size

Chapter 1: Preparing for the Sale

  • Preparation vs. Execution 
  • Why Your Business Might Not Sell 
  • Increasing Your Business’s Value
  • Informing and Retaining Employees
  • Organizing Key Documents
  • Normalizing Financial Statements
  • Why Some Businesses Don’t Sell

Chapter 2: Valuing Your Business

  • 5 Reasons Valuations Vary
  • The 2 Most Common Measures of Cash Flow
  • Choosing the Right Measure of Cash Flow
  • The Only 2 Valuation Methods You Need
  • 9 Valuation Concepts to Understand
  • Choosing the Right Appraiser

Chapter 3: Financing

  • Where the Money Comes From
  • Selling Your Business for All Cash
  • Seller Financing
  • Let Uncle Sam Finance Your Deal – SBA Financing
  • Financing a Business With Retirement Funds

Chapter 4: Team

  • M&A Advisor
  • M&A Lawyer
  • Accountant
  • Tips for Hiring and Working With Your Advisors
  • Other Specialists

Chapter 5: Buyers

  • The 4 Types of Buyers
  • Individual Buyers
  • Financial Buyers
  • Strategic Buyers
  • Industry Buyers
  • Key Points
  • Why a Company May Acquire Your Business

Chapter 6: Marketing

  • Fishing vs. Hunting for Buyers
  • Fishing – Using Ad Portals
  • Hunting – Using Targeted Campaigns
  • Other Ways To Find Buyers
  • Maintaining Confidentiality
  • An Introduction to NDAs
  • Preparing an Information Memorandum
  • Screening Buyers
  • Screening Employees
  • Screening Non-U.S. Citizen Buyers
  • Screening Investors
  • Avoiding Tire Kickers

Chapter 7: Meetings

  • Meeting the Buyer
  • Guide to Negotiating Tactics
  • Your Secret Negotiating Weapon

Chapter 8: Offer

  • It’s More Than Price – Negotiating Deal Structure
  • The Parties’ Conflicting Objectives
  • Factors That Affect the Scope of Negotiations
  • Negotiating the Letter of Intent
  • Locking It Down With a Deposit
  • When To Take Your Business Off the Market
  • I’ll Pay You Later – Considering an Earnout
  • What Happens to Debt
  • Trust But Verify – Escrow Holdbacks
  • Legal Transaction Structure – Asset vs. Stock Sale
  • Non-Compete Agreements

Chapter 9: Due Diligence

  • Halfway There – The Purpose of Due Diligence
  • Sample Due Diligence Checklist
  • Transferring the Lease
  • Give the Tax Man His Cut – Allocating the Purchase Price
  • How Your Entity Type Affects Deal Structure

Chapter 10: Closing

  • The Final Days – Overview of the Closing Process
  • Almost There – Preparing for the Closing
  • Negotiating the Purchase Agreement
  • Not So Fast – Representations and Warranties
  • Skeletons in the Closet and Indemnification
  • Almost There (I Promise!) – Escrow
  • You Made It – Closing Day
  • After the Closing

Conclusion

  • Final Thoughts
  • Additional Resources

Appendices

  • Appendix A: Glossary 
  • Appendix B: Due Diligence Checklist
  • Appendix C: Purchase Agreement Clauses
  • Appendix D: List of Closing Documents
  • Appendix E: Escrow’s Duties
  • Appendix F: Recommended Reading
The Art of the Exit

About the Author

Jacob Orosz

Jacob Orosz is President of Morgan & Westfield, host of the M&A Talk podcast series, and author of numerous articles and books on M&A, including The Complete Guide to Selling a Business. He has over 20 years of experience facilitating mergers, acquisitions, sales, and other business transfers with transaction values up to $75 million.

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