& BizBrokerOnCall – Mediation Services



About Us

We offer two unique mediation functions; 3rdPartyOnLine & BizBrokerOnCall.

3rdPartyOnLine is a programmed website function designed to provide ANONYMITY to business owner and/or business buyer through 3rdPartyOnLine intermediation, and thereby to retain the CONFIDENTIALITY of their information, particularly during stages of advertising, introduction, the establishment of Confidentiality Agreements, and first exchanges of information between Buyer & Seller … until the two Parties ask to be introduced.

BizBrokerOnCall is to provide personal hands-on offline assistance and selected services as may be requested, periodically or steadily along the way … on an as needed, on call basis.

Business Buy/Sell processes can be described quite completely in Seven Selling Steps, as listed and detailed below.  We are experienced Business Brokers and will be are happy to provide assistance in any or all such step(s) … on an as needed, on call basis.

  1. Initial Business Valuation
  2. Confidential Presentation
  3. Finding the Right Buyer
  4. The Offer to Purchase
  5. Due Diligence
  6. Final Business Valuation
  7. The Close of Sale

The Seven Selling Steps Described & Explained

1 – Initial Business Valuation

Once an owner has decided time is come to sell the company, the first question is generally how much? The first step in the process should be to analyze and to calculate a full, fair market and justifiable business valuation.

There are several generally acceptable valuation techniques, all which, by and large, can be categorized as one of, or as some combination and/or variation of three general methods.

  • Asset Cost Base method, which is based on replacement cost, or fair market value of included assets.
  • Income or Earnings Based method, which looks at the present value of future earnings.
  • Market Comparison method, which estimates the value of one business by the comparative valuation of others.

In our view, the first two are most applicable to the valuation of small closely held businesses. In our view, the value of a small business is typically that amount which is equal to the value of its balance sheet plus the value of its goodwill, which is a calculation that combines elements of cost based and of earnings based methods.

Balance Sheet Value is simply the net of assets minus liabilities included in the sale. Assets are usually valued at book value in a share sale, or at fair market value in an asset sale, and liabilities at book value. Balance Sheet Value is a relatively simple and non-controversial calculation that represents retained earnings from the company’s past business. Balance Sheet Value is a reasonably known entity.

Goodwill Value is not so known, but based on the anticipation (estimation) of the future earnings that can be sustained out of the market presence here-to-fore established by the company. Goodwill valuation means to place a value on those sustainable earnings, which will be typically calculated on a multiple of *normalized ebitda. (*which means earnings before interest, taxes, depreciation, amortization, which are then normalized also to before extraordinary or non-business, non-essential and non-recurring income, costs and expenses.)

Cash Flow set the limits. Ultimately, the business will be expected to pay (repay) for itself over a reasonable period of time following the sale. Discretionary cash flow available from normalized ebitda will impose a regulator on the valuation, based on what the cash flow can support, service and repay over that reasonable return period.

This Initial Valuation should establish the method and manner in which selling price is established and in which valuation will be maintained (updated) throughout the time it takes to sell the business. In an on-going business, value will be incrementally changed literally with every business transaction. To capture the accumulation of such changes, valuation should be updated just prior to an offer to purchase, and then again just prior to the close of sale, which we will talk more about later.

Business Valuations and ValuPro are more thoroughly described in the Business Valuations section and in the ValuPro section.  Briefly however, in analyzing and in the calculation of such business valuation, we typically use a valuation program called ValuPro, which is a program developed by davidsonashe, inc.  In our descriptions of the valuation and presentation processes, we will refer to ValuPro from time to time because it employs the techniques and methods we deem most suited to the occasion and because it provides us with ready example and illustration.

ValuPro is designed to calculate a fair market value of a viable on-going business on the strength of its balance sheet, on the sustainability of its earnings and on the ability of a business to pay for itself over a reasonable period of time. ValuPro is also designed to generate a series of business profiles or business-for-sale presentation packages.

ValuPro is not designed to calculate the value of a ‘start-up’ or any business without earnings, unless earnings can be credibly forecast, which is often a tall order, but there may be times, such as in a new franchise perhaps. Otherwise, no earnings are apt to mean no goodwill value and apt to limit the value of the business to simply the value of assets alone.

There may indeed be business potentials; maybe some startups, inventions, good ideas, buy-a-job, however, where there will be real but non-calculable intangible value, value that may be evident only to the eye of the beholder, …still, those are not the business valuations ValuPro was designed to calculate.

2 – Confidential Presentation

Buyers want to learn what they need to know about the business as quickly as possible, and then either proceed with it or move on to another. Business owners, on the other hand, will be concerned about disclosing confidential information.

Blind Business Profiles are an effective and confidential way to present the business-for-sale to prospective buyers. In fact, we recommend a series of profiles in order for both parties to be able to gauge what if any impact each disclosure might have on continuing interest, in order to stop and limit disclosure should the level of interest become insufficient to continue.

Below are described four such progressive profile examples.

Business-for-Sale Ad Profile: Assuming a business-for-sale ad has been posted or will be posted, the first profile will be that presented by the Ad. Recommend the ad be meaningful, complete with price and terms of payment, description of the business in terms of business type or commercial sector and that it provide a quick financial summary of the business in terms of sales and earnings, but that it not identify the business by any means.

Introductory Profile: The second should be an introductory profile that (in our opinion) should not identify the business by any means but which should again provide the price and terms of payment, describe the business by type or commercial sector and should provide a quick financial summary of the business in terms of sales and earnings over the past several years.

The introductory profile may not provide much more (if any) than the ad, except it should include a confidentiality agreement to be signed and submitted by the buyer in order to obtain additional information.

Financial Profile: The third should be a financial profile that (again in our opinion) should not identify the business by any means but should expand the financial detail. It should describe and justify the valuation or basis on which pricing has been calculated or presented, and it may also expand on the business description with care not to identify the business itself.

The financial profile should include enough information for a buyer to reasonably gauge a continuing level of interest and we recommend that to obtain additional information, the buyer be asked to provide disclosure as well, that would simply indicate the buyer’s ability to purchase the business should further disclosures and investigation lead to such.

Business Profile: The fourth should be the full business profile, but which still (in our opinion) should not identify the business. A buyer wants to know ‘what the business owns, …what the business earns, …what the business does, …what types of products, …what types customers and how they pay, and …what types of suppliers and how the company pays’. That information can be provided in detail without identifying the business, and that is what we recommend.

Eventually of course, if, when and as both parties agree that a good business fit does seem to exist, then business identity, introduction and other disclosures will be necessary to the progression and completion of a sale.

In the meantime, business owners represented by third party agents, such as a business broker, or a realtor, or a lawyer, or an accountant, or others perhaps, can, through such agency, maintain a buffer between buyer and seller that will allow parties to maintain confidentiality and withhold identity until a reasonable fit can be gauged.

On the other hand, businesses for-sale-by-owner will often have no such buffer. Even when the ad is non-identified and if all the profiles are non-identified, it will be difficult for the buyer and seller to maintain anonymity past the first contact, unless some form of buffer is inserted. We think it’s a good idea to do so and offer the following suggestions.

  • engage the representative services of a Participating Broker or other third party agent, or
  • subscribe to the confidential intermediation services of Business-Trader Intermediary
  • subscribe to the confidential messaging services of Business-Trader Messenger
  • obtain a non-identifying email address, such as a g-mail account perhaps, and make that the sole point of contact.

3 – Finding the Right Buyer

Finding the Right Buyer should not be a long or difficult process, provided you have a profitable business that can be transitioned to and profitably continued under new ownership.

Of course, the Right Buyer is first one who will recognize the right fit between himself/herself and the business. A buyer looking for a heavy steel manufacturing business is not apt to purchase a retail candy store.  It’s just the wrong fit.  But, whether you have a viable manufacturing business to sell or have a viable candy store to sell, our experience tells us that today, there is a serious and qualified buyer ‘somewhere close by, who is actively searching for you.’

In fact, we have not known a time during our involvement with businesses-for-sale when there have not been more ready, willing and able buyers looking for good businesses, than there have been good businesses available for sale; or at least good businesses that have been effectively presented for sale.

We’ve found, by and large, when a sustainably viable business has not sold in reasonable time, then either:

  • business buyers have been unable to find the business or unable to recognize the opportunity when they have, or;
  • relevant information has not been reasonably available to those inquiring, or just too tough to get from the owner, or;
  • the facts within the information had just not justified the price and terms asked by the owner for the business.
  • Our experience has been, “satisfy the above and you’ll find the right buyer or the right buyer will find you.”

And in our experience selling small businesses, the right buyers have almost exclusively been total strangers to the business. Similarly, buyers searching for your business today are probably strangers to you and unconnected to your industry or to anyone in the industry. And specifically due to the lack of connection, industry strangers are probably the safest and most confidential buyers to work with, particularly when confidential information must be disclosed.

Of course, the right buyer could also be someone from within the industry. It could be or a customer, or a competitor, or it might be an employee or a group of employees, but unless that party has already contacted the seller, and has already expressed a sincere and capable interest in buying, for a seller to make any inquiry of any of these can certainly let the cat out of the bag and we suggest that you think this over carefully before doing so.

So with that in mind, set out the price and terms in the ad so it can be seen quickly to either fit the buyer’s range, or not, and equally important, set out balance sheet value along with sales and earnings levels so the buyer can see validity to the pricing, and then describe the type of business and the location of the business, both in general and non-identifying terms.

Then, when a good prospective buyer is found, or when a good buyer finds you, respond quickly to enquiries and in your response, continue to make it easy for the buyer to measure the fit and opportunity, but do so in a safe, secure, confidential and non-identified manner until there are reasonable indications that the fit has the potential both parties seek.

The Right Buyer should be one equally prepared to provide assurances of confidentiality and legitimate intent, and one prepared to disclose such information as the seller will need to confirm fit as well, and ultimately, the Right Buyer will be one ready, willing and able to pay the full fair market price for the business.

As said previously, finding that Right Buyer should not be long and difficult, once you’re ready.  …but, it could be vital to the well being of your business and to the ultimate success of your selling process, that you disclose very little of your intent until you are ready with a fair market valuation as discussed in step 1 or based on some other justifiable reason, and a presentation of such as discussed in steps 2, and with a sale and transition strategy such as described in steps 4 thru 7.And until you are prepared and ready, we recommend there be no trial balloons floated out around the industry; no premature listings on business-for-sale websites such as Business-Trader and others; no discussion with employees, customers, suppliers, competitors and no discussions with anyone other than those who may be assisting you, until you are ready to handle the results you are looking for and ready to avoid those you are not.

For business owners, selling the business is often a one-time experience, and importantly, a once-in-a-lifetime opportunity. Buyer’s, on the other hand, will often have had some previous experience. Some will have purchased a business before and some will have sold a previously owned business and some may be quite knowledgeable about the level of diligence required to reach an informed judgment and complete the deal. At minimum, most buyers will investigate several opportunities in their search for the right business, and your business will probably not be the first.

And just as there are buyers searching for a business just like yours, there are others searching for businesses not just like yours. Your business will fit some but not others, and you’ll want to make the fit (or lack thereof) as visible as possible to each potential buyer as early as possible in order to sort right fit from wrong as quickly as possible with minimum exposure. Price, terms, type of business, location and other relevant business facts (exclusive of identifying information), along with other suggestions offered above can go far toward sorting right from wrong.

4 – The Offer to Purchase

When the fit is good, when price and terms are seen reasonable, justified and acceptable, when owner and seller have met once or twice, typically, maybe toured the facilities and asked and answered questions of each other, and when the parties are ready to take the next step, that next step should be a written Offer to Purchase with subjects.

The Offer to Purchase should clarify whether it is a share sale or an asset sale, price and terms of payment, vendor take back, if any, matters of security, what assets/liabilities are to be included, what are to be excluded, what is expected from and by each party, matters of due diligence, matters of adjustment, matters of timing, and more.

The Offer to Purchase should include the value of and the valuation basis of the assets included. In a share sale, assets and liabilities included will typically be valued at balance sheet or book value, while in an asset sale, maybe at appraised value, or fair market value, or simply at agreed value.

The Offer to Purchase should schedule an ‘Offer to Purchase Date,’ an ‘Acceptance Date,’ an ‘Adjustment Date’ and a ‘Closing Date’ with enough time between each to accomplish all that will need to be done to close the sale.

The Offer to Purchase should include a ‘subject to due diligence clause’ and a subject to final valuation and price adjustment clause. There may be other subject clauses required as well; subject to certain banking arrangements perhaps, sometime subject to acceptance by a third party, such as a franchisor, subject to assumption of lease perhaps. There are often matters, particularly those involving third parties, that cannot be or should not be addressed until the end of the diligence process, so as to maintain confidentiality about ‘the business being sold’ until all other subjects have been satisfied and removed.

There are many issues to be addressed and agreed within the Offer to Purchase. The most complete understanding of all that we would typically include in an Offer to Purchase can be gained, probably, by reviewing a sample Offer to Purchase.

But in brief, we simply view the Offer to Purchase as the means by which to create and ensure a clear and detailed business-like understanding between the buyer and seller, in written form that will carry through the due diligence and closing processes, and that will ultimately convey that clear understanding and agreement to the lawyer selected to prepare the purchase and sale agreement and other closing documentation that may be required.

Offer to Purchase … items that should be considered, agreed and set out in the offer, when applicable

Sample Offer to Purchase

Offer to Purchase
  • Purchase and Sale Price – price components; goodwill value; balance sheet value and breakdown
  • Accounts Receiveable – how are A/R valued, are they discounted by an allowance for bad debt, or are they guaranteed 100% collectable or repurchased within a reasonable period of time.
  • Inventory – how is inventory valued, how is it counted, when, by who
  • Shareholder Loans (if any) – how are they handled
  • Bank or Other Debt – line of credit, term loan, equipment lease, related guarantees
  • Assets and Liabilities – what are included in the sale, what are excluded from the sale
  • Share or Asset Sale – is the legal structure to be share sale of asset sale
  • Anticipated Adjustments – is goodwill value and/or balance sheet adjustable prior to the close
  • Terms of Payment – cash to close; vendor take back (if any) payable over what period in what manner
  • Security Deposits – refundable, non-refundable, under what conditions
  • Business Premises – leased or owned, included in the sale or new lease or assumption of lease
  • Non-Compete Agreements – who, what restrictions, what territory, what period, what conditions
  • Schedule of Events – offer date, acceptance date, due diligence date, adjustment date, closing date
  • Due Diligence Event – what, when, where, how, who, outline, schedule
  • Closing Event – preparation of documents, by who
  • Post Closing Transition – adjustment until close, training and assistance, consulting or advisory
  • Business Premises – leased or owned, included in the sale or new lease or assumption of lease
  • Subject Clauses – subject to due diligence, banking, certain other events perhaps
  • Arbitration – how will disputes, if any, be resolved
  • The Closing – when, where, how

5 – Due Diligence

The Offer to Purchase should contain a ‘subject to diligence’ clause written to the benefit of the buyer, and a ‘subject to diligence’ clause written to the benefit of the seller, whereby both parties will be granted access to books, records, materials, contacts and/or other information in order to satisfy both parties that they are indeed in possession of the relevant facts on which the Offer to Purchase has been made and accepted. If either should find otherwise, the buyer must be able to withdraw the offer, and/or the seller must be able to withdraw acceptance of the offer, without penalty.

The diligence period and diligence process should be defined and scheduled by the Offer to Purchase. The ‘subject to diligence’ clauses should contain an expiration date, after which, if not first satisfied and removed by the beneficial party, the offer or acceptance may be withdrawn by the other party without penalty. Similarly, the ‘subject to diligence’ clauses should contain scheduling with respect to the more sensitive diligence areas, such as diligence pertaining to customers or employees perhaps. Such diligence should be scheduled to the end of the diligence process, after all less sensitive diligence has been completed and those subjects removed.

In order to maintain confidentiality to the greatest extent possible throughout the process, until this time the buyer will have not had diligence-level access to all that may be necessary to the satisfy the buyer, who will have instead relied on the information contained in the confidential business profiles and on other information learned through questions and answers, discussions, tour(s) of the business, etc., and the Offer to Purchase will have been submitted based on that reliance. Similarly, the seller will have based acceptance of that Offer to Purchase on the representations of the buyer.

This will have enabled buyer and seller to reach a business-like agreement on key issues, such as price and terms, vendor take back, payment and security (if any), what is to be included in and what is to be excluded from the sale, adjustment formula, completion, closing and transition schedules, non-compete agreements, etc., all without prematurely exposing the business and perhaps the employees to the interruption and the curiosity and uncertainty of the full diligence process.

But once the Offer to Purchase will have been made ‘subject to diligence’ and accepted ‘subject to diligence’ it will be time to prove these representations by opening the books and records and other points of relative information to the scrutiny of the buyer and/or buyer’s agents. However, this is not meant to suggest unscheduled or uncontrolled access. The seller will still have a business to run and concerns about confidentiality and concerns with respect to employees, customers, and others. Thus, while the diligence process must be satisfactory to the buyer, it must also be safe for the seller in the event, for some reason, the sales should fail to close.

The buyer’s subject clause in the Offer to Purchase should provide that if not proven to the satisfaction of the buyer during such diligence, then the Offer to Purchase may be withdrawn by the buyer without penalty. Thus, it will be highly important that the pre-diligence work conducted during calculation of the valuation and the preparation of the business profiles be thorough and factual and confirmable. Big surprises or too many surprises during diligence will generally be fatal to the deal.

Similarly, seller must be granted access to such information that will satisfy seller that the buyer is capable and dependable, and the seller’s subject clause in the Offer to Purchase should provide that if not proven to the satisfaction of the seller during such diligence, then seller’s acceptance of the Offer to Purchase may be withdrawn by the seller without penalty.

See sample due diligence (soon to be available)

6 – Final Business Valuation

The Offer to Purchase should provide that the Sale Price will be subjected to final valuation as at ‘Adjustment Date’ and provide that final valuation be calculated on the same formula that calculated the Sale Price as at the Offer to Purchase, particularly as it pertains to Balance Sheet Value.

Assuming that the business is a going concern and that it will continue to conduct business as usual up from the time of the Initial Valuation until the Offer to Purchase, and until the Close of Sale (and beyond obviously), then, revenues generated, costs and expenses incurred and earnings or losses accruing to balance sheet as result of the on-going business, will, with every transaction, alter the balance sheet component of the valuation and of the Sale Price.

We have suggested earlier that the business-selling process begin with an initial valuation based on latest and most complete financials available at the time. We also suggest that the valuation and the profile presentations be kept current by updating the valuation on a monthly or quarterly basis thereafter, until the business is sold.

Offer to Purchase: The valuation and profile should be updated to the most recent month-end preceding the Offer to Purchase, and that valuation should provide the Sale Price offered.

Adjustment Date: Then, the valuation and profile should be updated as at Adjustment Date. Between the Offer to Purchase and Adjustment Date, while the valuation may be updated once or twice for diligence purposes, re-valuation will usually not impact goodwill value materially since goodwill valuation is typically based on an average of earnings calculated over a period of years, and adding and averaging one or two months more into the mix will usually have little or no impact.

However, that is not the case with Balance Sheet Value, which is directly calculable on ‘the day of valuation.’  The balance sheet will be directly impacted by continuing business on a daily basis. That impact will be calculated in the ‘Adjustment Date valuation’ and the Closing Sale Price should be adjusted by the net difference between Offer to Purchase and Adjustment Date balance sheets. And, just as in the Initial Valuation, Sale Price in the final valuation will continue to be the sum of ‘Goodwill Value plus Balance Sheet Value.’

Of course, if something was to occur between the Offer to Purchase and Adjustment Date, that did materially impact Goodwill Value, updated valuations (and due-diligence) would expose the impact and provide opportunity to deal with it.

Adjustment Date, will typically be scheduled as the last day of the month prior to the Closing Date, and will ‘effectively’ become the last business date under the seller’s ownership. Of course the business will not actually change hands until the sale closes at Closing Date, but closing documents will effect the change to be as at Adjustment Date.

7 – The Close of Sale

It has been our experience that when the pre-diligence and preparation has been thorough, when the right business and its owner and the right buyer have discovered each other, when they have spent the time and effort to understand the opportunity each represents to the other, the Offer to Purchase is a detailed but easy next step.Similarly then, when access has been open and due-diligence has proven the opportunity, closing the sale on the terms agreed in the Offer to Purchase is simply a matter of document preparation, and then the sale closes quietly with the execution of closing documents and the exchange of consideration.

For reasons described below, we recommend closing documents be prepared by a lawyer neutral to both buyer and seller.

Often, an agreement that has been cooperatively negotiated between buyer and seller, one considered balanced by both parties will be taken to the lawyer for one party or the other, (generally the lawyer for the buyer), who will draft closing documents that are not balanced but distorted in favor of that lawyer’s client. That change will generally come as a offensive shock and not well received by the other party who thought they already had a deal. And many times, the deal can break down on that point of disagreement and never get back on track. Other times, the two lawyers may battle it out in order to renegotiate the deal that had already been satisfactory to the parties, while the timeclocks of both are running.

The objective of the neutral closing lawyer will be to close the agreement already crafted in the Offer to Purchase. The objective will not be to renegotiate or change the body of the agreement negotiated by the parties, but simply to conduct the necessary legal searches required to ensure clear and transferable title of all that is to be transferred in the sale, and to translate the agreement of the parties represented in the Offer to Purchase into the legal documentation and structure to close the sale.

The neutral lawyer can be expected to mitigate the legal matters of the agreements and of the transition contemplated, but to carry no tendency toward the one party’s interests over the other. A neutral lawyer will be in position to provide a truly balanced approach to the preparation of the closing agreements.

Then, in sufficient time prior to the Closing Date, the documents drafted by the neutral lawyers will be forwarded to the lawyers for both the buyer and the seller so as to provide both ample time for review and to advise their respective clients, and if necessary, recommend changes to their clients and to the neutral lawyer as they may deem appropriate.

The advantage to both parties is typically a balanced agreement, the absence of conflict, lower closing costs and, in the end, a deal that does close.


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