Ok, so you are lucky enough to have sold your business. Now what? One of the things sellers normally forget is the closing process. In one of my previous articles I mentioned that among the many things Business Brokers do for sellers and Buyers is to manage the closing process once a Purchase Agreement (sale) has been made. As brokers, we normally manage three (3) key areas after a Purchase Agreement has been signed: The Due Diligence, Lease Assignment and Closing Process.

During Due Diligence, we help both buyers and sellers (yes, sellers, too) verify the reliability of financial records. Lease Agreements, corporate status, etc. During this period—normally 10-15 days--we deal with accountants and lawyers asking for information pertinent to the business and making sure the information flow occurs as expected. After all requirements have been met, we ask the buyer to sign a “Due Diligence Release Form” indicating his satisfaction with the review. If the buyer is not satisfied within the timeframe allotted, all bets are off.

The Lease Assignment Process is perhaps the one where most deals are broken. Most Purchase Agreements include a Lease Contingency clause-- one where if the buyer cannot obtain a lease the deal is off. Unfortunately, most Landlords are unwilling to go from one lessee to another without a tremendous amount of scrutiny. So, we, as brokers, must convince them of the financial capability of the buyer to undertake the lease assignment “for the landlord’s benefit,” or, a win-win for both the buyer and landlord. This, my friends, is “easier said than done.” As I mentioned before, the landlord has no motivation to provide either an assignment or a new lease—he already has someone (the seller) committed to pay the rent.

Last, but not least, we manage the “Closing Process.” The Purchase Agreement becomes the basis for the preparation of about twelve (12) or more documents—depending on the complexity of the transaction. Brokers normally take both the seller and buyer through this process by going over each one of these documents. Failure to follow this process may mean a deal broken at the closing table, where either the buyer or seller would indicate ignorance. Some of these documents are shown below:

a. The Affidavit. The seller indicates ownership of the business being sold; all information provided to the buyer is correct, no outstanding liabilities etc.

 b. Allocation Agreement. An agreement as to how the sale of the business will be allocated among its assets, where the balance normally is goodwill.

 c. Bill of Sale. The seller indicates his/her agreement to sell their business and the components of it; such as websites, Business name, etc

d. Buyer Written Action. The buyer’s corporation consents to the purchase of the business.

 e. Closing Agreement. Buyer and Seller indicate that conditions within the contract have been satisfied.

 f. Indemnification. Buyer and Seller hold each other harmless from losses.

g. Non-Compete. Seller agrees not to compete within the pre-established distance and time.

h. Pledge of Lease. Buyer agrees to guarantee lease payments or forgo business.

 i. Security Agreements. Buyer pledges the business as security for non-performance on Promissory Note.

j. Seller Written Action. The Seller’s corporation consents to the selling of the business.

 k. Promissory Note. The conditions to pay back the seller financing.

l. Closing Statements for both Seller and Buyer. Distribution and Receipt of funds.

The proper management of the areas listed above would insure the successful completion of a sale. Make sure that you have a competent business broker who can effectively negotiate and navigate your sale through these very “dangerous waters.”

Should you want to know more about buying or selling a business in Central Florida, visit my website at www.bizbuyorsellflorida.com, email me at fsimo@tworld.com or call me at 407-361-8886.