I’ve always felt that a good and wise person made things simple. Alas, that is not the case in selling your company. You will need to master a whole bunch of new definitions.

One client who built a $25,000,000 business had a GED and great Common Sense combined with Mechanical Genius said: “I am always put off by the things I needed to understand to sell my company. I lacked a formal education and lived in my narrow mechanical world. I do not want to ask questions and seem stupid and whenever one of the people trying to get me to sell my business explained things they was always over my head -- leaving me cold and embarrassed.” A great compliment was that he understood us (Dennis or Michael the two principals of Spector Solutions) when we explained and even more important he felt confidence and trust.

So, here are the key 2 dozen definitions you need to master. See if we have accomplished the objective of simplicity. Then take a look at our web site and call us.

Rollover Equity

You do not want to lose control over your economic life for 3 to 5 more years, but it all depends on the initial price achieved! And also about your feelings about the future – they will want a lot of rollover and you will want what you want not what they want. Think of the rollover as a deferred payment.

Taxes

Therefore, there are ways (some call them loopholes) to minimize taxes and save a lot of money – maybe millions, but one must be oh so careful. To help understand this we always put together a tax plan, we do this in conjunction with your CPA. It is what you take to the bank that matters and if you do not watch the pennies you do not watch the dollars.

Earnouts

If a company really wants to buy your company an earnout can be avoided. If real growth is taking place then an earnout works for you and ties to your rollover equity. You want to dictate the terms. Again we have a deferred payment – do you want it?

Employment Contracts

You’ve worked hard, do you may not want to work another 3 to 5 years? If they want to buy your company there are ways to make this work for you. And avoid a 3 or 5 year legally absolute employment obligation.

Accounting/Management Reports

You’ve lived and breathed this business for 20, 30, sometimes 40 years – it is in your gut and you always knew what was happening. So, this area is not important and most likely not been a priority – taking care of the customer is the key you focus on. Well, the other side wants to see it – they do not know like you do.

Offering Prospectus

If a picture is worth a 1000 words, an excellent offering document is worth many millions of dollars – thus we put the time and excellence in it.

Quality of Earnings (QofA)

A CPA firm comes in and does an economic review to assure all is well. The QofA is just “belts and suspenders” for the investment banker to say: “Hey, look we did our job.” It’s a way to answer the target buyers’ questions with some level of authority -- not needed if Spector Solutions does its job.

Operational Plan

You know how you operate, what makes the company tick, what your benefits to your customers are and why things work. The buyer wants to know all these things and see that there is a plan that is moving forward and there has to be the famous “Continuous Improvement”.

Representations & Warranties (R&W)

Contracts are legal documents and enforceable – the last thing that you want is to end up in court. Everything you sell is warranted or a representation. Everything has to be accurate, disclosed and properly documented in the purchase and sale agreement. Making sure that the buyer has looked at and asked their questions (due diligence) is the best CYA insurance – then they cannot say: “I did not know, you did not tell me.”.

Escrows

The key is to follow-up, track them and you get your money back by making them tight, clear and easy to clean up.

Real Estate

The ownership of the real estate can create a myriad of complexities. They buy it, we keep it, leases, we sell it separately, we spin it out of the company on a tax free basis via a drop-down LLC – wow, ever hear of one. And, it all has to be done along with all the rest of the “stuff” – just makes it a bit more involved.

Offering Strategy

The investment banker will want to go right to the market. It may benefit you to discuss with the company(ies) you are sure you like. You are placing you, and your people in bed with them. Make the steps your choice.

Targets for Sale

At all times the investment banker will brag about their relationship with potential buyers and that can help. But it can also be a two-edged sword cutting into you. They may want to “kiss the hand that feeds them over and over again”. Your only recourse is to say no. You need total trust in these people that you are all that matters.

Due Diligence

Key area, loaded with questions, analysis requests and paper – must be done right to protect you and speed up the closing. And, no one likes to look foolish with “I don’t know”. Plus everything you say and sheet you prepare is a warranty & representation. “Prior planning prevents piss poor performance” -- ever this old saw be true, it is here.

Investment Bankers & Brokers – Who Are They?

Here the issue is real simple – do you want to be tied up for one to two years until you know and trust these people? Most are very good and competent, but they want to sell and do it quickly – not unlike a real estate agent. And, most will not take the time or effort to do what we do. They will insist on tying you up for one to two years.

System Updating

You have not needed to clean up this area. You and your people have grown up with the business and know everything. This is not good enough for the buyer – a plan and steps (not all but some) must be taken to get it done.

Modern Web Presence

The web with its online marketing, customer contact, efficiency of sale/customer service and marketing information is the new/current era – it will enhance your sale value. And, it is doubtful that you have done the best given the complexity, cost, size of change and running the company.

Marketing Analysis

Better know your market and the terms used to explain it. It all begins with the answer to the always asked question: “Tell us about your marketing?” Answer: “It all starts with understanding the relationship of my product to my customer”.

Marketing Plan

Everything is about getting the trucks rolling and they do not roll until you get the order. A good marketing plan, with the actions, rational, steps and ongoing implementation keeps the orders flowing – the web probably will be the key part. But there is more – like but not limited to -- new product development, promotions such as email, price increases, marketing information, added channels of distribution, etc., etc.

Strategic Plan

This is the pulling together of all the plans, with the overall view of the company, the world and the longer-term issues. – with priorities and tracking.

Environmental Determination - Steps & Plan

If you have a problem, and almost all manufacturing does, then you need help. We know the best environmental consultants, we know how to get the issue defined and solved – with economic and time efficiency. Otherwise you will have the buyers’ lawyers and environmental consultant in your underwear and that gets onerous/expensive/time consuming – and they may be out for winning concessions from you. Make sure that does not happen in a very hard to define area.

Negotiating Posture

Strong, confident, running the business intelligently, good plans, great culture with loyal/excellent employees, growing sales/profits. And, also can address the issues raised.

Discounted Cash Flow (DCF)

DCF is just another way to calculate the multiple of EBITDA that you will get. The multiple along with the EBITDA determines the price – so 9 is better than 8 and 8 is better than 7.

Rep & Warranty Insurance (R&W)

Really like buying homeowners or car insurance – only new terms and conditions. Thus, you need someone who knows the ground rules.

What IS EBITDA?

At last the winning pitch of the game. There are a lot of items that get added to profit before taxes (PBT) – we know them all you do not & perhaps you do not know where to look for them. Two key items – the costs to get ready to sell are non-recurring (of course) and that is an Ebitda add back & the buyers CPA firm will try to beat your Ebitda down and you have to be ready to cut them off. We are experts at “prior planning prevents piss poor performance”.