1. Harvesting and Exiting the Venture Sell the Business Chapter 14

2. Presentation Outline Personal Reasons for Selling
Business Reasons for Selling
Determine the Company’s Valuation
Determine Best Candidates
Tax Considerations: What Method is Best for the Seller

3. Personal Reasons for Selling
Investors Are Forcing You to Become Liquid
Cash-in from Entrepreneur
Disagreements
Acceptable Unsolicited Offer
Business - Burn Out
Personal Event
Poor Health

4. Business Reasons for Selling
Requires Significant Capital for Growth
New Competition
Limited Opportunity
Close to Closing
Market Condition Forecasts

5. Determine the Company’s Valuation
Valuation Based on Financial Evaluation
Strategic Marketing Value

6. Determine Best Candidates
Strategic Buyers
Competitors
Related Businesses
Manufacturers of Related Products
Companies with Announced Acquisition Plans
Financial Buyers
Management - ESOP
High Net Worth Individuals

7. Tax Considerations: What Method is Best for the Seller
Stock for Stock
Cash for Stock
Installment Transaction

8. Double Taxation
Asset Sales - Corp. Tax + Stockholder Tax

9. Financial Up-to-Date
Maintain the Finances on a Consistent Monthly P & L and Cash Flow Basis

10. Prepare 3-Year Projections
by Month Actual Account Plus Future Accounts
by Actual Product Plus New Products
by Region and/or by Store

11. Know Why You Are Selling the Company
Strategic Reasons
Growth Exceeded Management Capabilities
Diversify Net Worth
Other Interests
Getting Older - Illness - Divorce
Owner Disagreements
Investors Desire to Liquidate

12. Things to Do While Running the Business
Keep Term Liability Agreements Short
Leases - 2 to 3 Years with Options to Renew
Distributor Agreements - Short Term Cancellation
Supplier Agreements - Cancel at Your Option or in Days
Keep Term Asset Type Agreements Longer
Employee Non-Compete Agreements
License and Royalty Agreements
Sales Agreements with Price Escalation
All Agreements Must Be Assignable

13. A Model for Running the Business
Develop a Prestigious Customer List
Keep a Well-Maintained Facility
Show a Continuous Growth in Sales and Profits
Develop Propriety Assets
Patents, Copyrights, Trademarks
Process Know How: Formulations and
Documentation
Develop a Well-Respected Sales Distribution Channel
In General, Do Things That Others Will Value Much Higher Than Your Cost to Create Them

14. The Actual Process of Selling (Average Time from Beginning to Closing is Up to One Year)
Develop a List of Candidates
Choose a group of strategic buyers
Try to Play the Role of a “Reluctant Suitor”
Have Others Make Initial Contacts
Investment Bankers - Consultants - Brokers, etc.
Get More Than One Serious Candidate
Use Competitive Negotiation Strategies
Let All Candidates Know Others Are Interested
Negotiate An Equitable Sales Price And Related Issues

15. The Actual Process of Selling (Average Time from Beginning to Closing is Up to One Year)
Select One Candidate
Develop A Letter of Intent
A) All Equity Issues Described “How Much”
B) A Period of Due Diligence - 15 to 60 Days
Negotiate a Definitive Agreement of Sale
Closing