usinesses buy and sell goods and services all the time. Occasionally the company itself is on the table. An owner might be liquidating the enterprise, handing it over to a new generation, or expanding through an acquisition—or an entrepreneur is ready to enter the game by purchasing an established operation. An array of professionals are available to help ensure a smooth exchange and a fair deal for both sides.

A good place to start is the Alaska Small Business Development Center (SBDC). “We have business expertise, numerous resources, and access to a network of professionals to refer clients to for help with legal, financial, and other issues,” says Carlos Machuca, director of the Alaska SBDC Anchorage office.

When clients request help with purchasing a business, Alaska SBDC typically guides them through an assessment to identify their goals, skills, experience, and financial resources. It also steers them in the direction of businesses that are for sale. Most clients already have a company in mind to buy, but those without prospects can explore a website like BizBuySell.com to see a list of companies that are available nationwide.

At BizBuySell, users can find companies for sale in a variety of categories, from agriculture, construction, and financial services to retail, restaurants, and service businesses. In April, for example, the site listed Soldotna-based D & L Construction Company for sale. The asking price of $6 million included $3.5 million worth of furniture, fixtures, and equipment; 6,000 square feet of shop and office space; and the option of purchasing with owner financing. The listing noted the company’s gross revenue of $3 million and cash flow of $950,000. All important details for initial consideration.

Once a potential buyer identifies a business to purchase, the next step is due diligence. A thorough examination of the business’ financial health entails an informal valuation of what the business is worth and compiling financial analysis, projection models, and any additional information a lender might require. Alaska SBDC can help clients with those steps, but the center does not provide in-depth accounting, tax, or legal advice; instead, it refers clients to professionals in these areas.

When advising owners on the intricacies of selling, Alaska SBDC often shares strategies to enhance the business, such as improving their financial statements. “There’s nothing worse than trying to sell your business and you do not have your financial records in place,” Machuca says. “We send them to a CPA [certified public accountant] so they can have an audit completed of their financials.”

If owners are not receiving offers for the price they desire, maybe the company is not profitable enough, Machuca says. Alaska SBDC helps owners review their expenses, prices, services/products, strategies, and operating procedures, so they can streamline operations and maximize value.

Depending on the type of company and how prepared the owner is to sell, it can take a year or longer to complete the sale. “We need time to prepare clients,” Machuca says. “When you sell a business, the exit strategy can be done long term or short term. Typically, the more time there is for planning, the more value owners can receive from the sale of their business.”

However, Alaska SBDC’s job does not end when a client buys or sells a business. Machuca explains, “In many situations, we continue working with the client with marketing, strategic planning, workshops, and other needs. We will continue supporting our clients through the life of their business.”

Before embarking on any business sales transaction, acquiring an accurate valuation is paramount for sellers and potential buyers. The valuation accounts for all tangible assets (equipment, inventory, buildings, and land) and intangible ones (goodwill, customer lists, and intellectual property) that are associated with the business. Having an accurate valuation can support a realistic pricing decision and help ensure a fair deal for both parties.

Alaska SBDC has multiple informal business valuation tools available to clients who are selling or buying a business. For example, ProfitCents, a database accessible through an Alaska SBDC advisor, can help clients with financial analysis or benchmarking. Another useful resource, which can be downloaded from Alaska SBDC’s website, is What Is Your Business Worth. It provides a comprehensive overview of the company’s value, considering a variety of financial factors.

Machuca emphasizes that clients need to augment the valuations generated with Alaska SBDC’s tools with a formal assessment too. “These are all informal valuation tools, so we always tell clients they need to go to a CPA, appraiser, or business broker to obtain a formal valuation,” he says.

Professional appraisers, accountants, financial advisors, and legal experts can contribute valuable insights. Individuals can look for one who adheres to the standards of the National Association of Certified Valuators and Analysts.

The best type of valuation professional depends on the type of business, says Andrea Canfield, a partner in the corporate group at the law firm Stoel Rives. “For example, if you have inventory, you will need someone who has experience valuing those specific assets,” she says. “But if you provide a service and your assets are in people, that’s where you typically see a CPA valuing off earnings, EBITDA [earnings before interest, taxes, depreciation, and amortization]. It just depends on what you are valuing.”

EBITDA, Canfield says, is the most common business valuation method she sees, being a straightforward and easily verifiable calculation of operating performance and cash flow. “It’s very palatable for business owners because the proposed sales price is something that is easy to confirm through financial records,” she says.

Business brokers, attorneys, and other professionals can play an important role in the sales process. As skilled intermediaries, they can steer either side through the transaction.

Typically, when an owner is prepared to sell, the owner either has relationships in place or will hire a broker, according to Brandon Spoerhase, a partner and broker at BSI Commercial Real Estate.

BSI assists buyers and sellers throughout Alaska by providing “local ground knowledge” of what opportunities might be available, Spoerhase says. “The value that we have is that we do this every day; we are in the marketplace, and we know who might be willing to sell their business based on relationships,” he says.

Spoerhase says it can be challenging to identify businesses for sale because owners tend to keep this type of information confidential, at least initially, until the potential buyer is vetted. “Most owners want to make sure their employees stay on and that the buyer has the wherewithal and has what it takes to grow the business,” he explains. “It’s kind of a research project between the buyers and sellers. Once we identify the business, we review all the documents. The more information you have, the better-educated decision you can make about whether you want to purchase the business.”

Document review involves a request for an overview of historical, financial, project information, corporate performance, pay, and benefit information. “We would try to discover all these things relative to the company and the nature of who we’re representing,” Spoerhase says. “We want to guide our clients through who their competitors are, so they have all the capacity needed to make a decision about the current operating level of how the company is being run and will need to be run in the future.”

Requested documentation can include two years of tax returns, balance sheets, profit and loss statements, inventory value, list of employees, and a real estate appraisal if applicable. Due diligence can also delve into pending lawsuits, retirement plans, salaried owners, payments to officers, gross annual receivables, loan balances, and the owner’s personal valuation of the business.

Spoerhase recommends going as granular as possible. Details relating to the company’s operating locations, product lines, sales cycle, marketing activities, diversification, and competitive advantages and disadvantages can be crucial for indicating its current strength and potential for future growth.

While business brokers can serve as principal advisors, they can also provide a vital connection to experts who understand the deal’s legal, tax, and regulatory implications. Complex transactions involving mergers and acquisitions (M&As) will require even more specialized legal counsel. M&A—the consolidation of companies or their major assets through a series of financial transactions—can be daunting, but experienced law firms, investment banks, and other specialists take on this challenge every day.

For example, Stoel Rives assists with various aspects of M&As. Its team includes experts on local, state, and federal taxes; intellectual property attorneys to help with trademarks and patents; labor and employment attorneys; and attorneys with expertise in specific areas like environmental regulations and mining. Stoel Rives works with both buyers and sellers, often by referral.

In Alaska, personal connections are integral for generating business, according to Canfield, who advises Alaska Native corporations and privately held, small and middle market companies in M&A. “Either we have a great relationship with a broker and they recommend us to represent their seller, or it’s by word of mouth,” she says. “We also get referrals from the other side… because we were reasonable, kind, and helpful during a previous transaction. It matters how you treat folks and interact with them—even in contentious transactions.”

In the current market, M&As are slowing down in Alaska, Canfield says. Since there’s less M&A activity, completing a business purchase has been taking longer. “Our economy up here in Alaska is still recovering from the pandemic,” she says.

Many recent transactions are due to retirement, and retiring owners prefer not to stick around after the deal closes. “We’re seeing a lot of owners not wanting to have a lengthy employment contract after they sell the company,” Canfield explains. This can complicate the due diligence process.

For a smooth sale, buyers and sellers should consider some factors unique to business sales. For instance, sellers usually focus on how much they will walk away with at closing, and this can slow down the deal. But Canfield thinks sellers should be more flexible about what they accept. “They should not focus on the bottom line to the detriment of the entire deal,” she says.

In addition, buyers can minimize closing delays and failures by better understanding the risk profile of the business they are acquiring. In-depth conversations with the seller and the management team can avoid unnecessary surprises. “We have found that buyers may get cold feet if they have to deal with things they were not aware of,” Canfield says.

Canfield also points out that transactions tend to go more smoothly if the seller is comfortable with the buyer. Therefore, instead of fixating on financial terms, the seller should consider a broader, more amicable perspective. “If you’re negotiating from a place of ‘I like the guys on the other side,’ I think that puts you in a better place to get the deal done faster—and be happier,” Canfield says.

A crucial factor often overlooked by buyers, according to Spoerhase, is the seller’s established relationships. Some buyers fail to appreciate the relationships the owner or founder has built. “At the end of the day, Alaska is still like a small town,” he says. “The guy who’s built this company and is selling it has gone through the trials and tribulations of establishing the company. And a new person who comes in may not have the knowledge or expertise to be successful. Unfortunately for the new buyer, if they are not successful, the seller can recoup the business, dust off what the new buyer did, and go back to having a successful business.”

By mastering key aspects of the business sales transaction, buyers and sellers can create a more rewarding experience for both parties.