The CBR contains business financial information, competitors, growth path, marketing information, historical data, what price the business is offered at, etc., which can be shared with a potential Buyer under an NDA. Another definition is Business Executive Summary and for even larger companies the terminology used is "offering Memorandum'. Advice for Sellers: if you are going to present a CBR make sure that it is accurate and it shows the full potential because your valuation is dependent on it. Advice for Buyer: make sure you understand the data presented and that you are well experienced in the business under consideration and what other markets you can serve with your products and services.
Buyers (and sellers) should be aware that the CBR or CIM should be accurate, complete, and transparent. Of course, it is a sales tool; however, it is also a representation of not just the business, but also the integrity of the seller. If there are negatives, they can be cast in the best light possible, but they must be disclosed.
For sellers -- be honest -- "the truth, the whole truth, nothing but the truth."
For buyers -- be diligent, take nothing for granted, verify everything -- "trust, but verify."
This document is supposed to be an introduction to a listed business. It is the first step to introducing a company. The attached financials may or may not be accurate or even real. They should not be relied on as a basis for an offer.
A couple of years ago, I was doing due diligence on a tanning salon. The broker had included extensive profit and loss statements that appeared to be printed from the sellers Quickbooks. When I finally got the original accounting records and printed out my own P & L statements for the identical time periods, I found that what was in the CBR had been altered. Payroll had been reduced and cleaning services had been removed entirely. The $175,000 profit per year shown in the CBR turned out to be less than $50,000 profit. The broker's explanation was that this is what the buyer would net with the suggested changes, located elsewhere in the CBR. I never found those suggested changes in writing.
Remember a CBR is only a starting point.
The CBR (confidential business review) is a tool used in offering a business for sale. Traditionally it is provided to qualified prospective purchasers of companies with asking prices of at least a few million dollars. But more recently, owners ready to sell smaller businesses such as coffee shops, retail stores, local service companies and many franchises, are preparing CBRs to aid in marketing their businesses.
A CBR that discusses a business for sale should not be handed to any interested parties unless qualified as legitimate potential buyers by the seller or a business sales intermediary representing the seller. To qualify a prospective buyer not only involves getting work history and financial statement, it also requires that the individual sign a non-disclosure form, promising the information disclosed about the business will be used only for analyzing the company as a purchase candidate and not shared with other people, except for professional advisors.
Included in the well-prepared CBR are these components:
--Overview of the company: Type of business, history, general description of location where the business is conducted, and brief statement about the business trend, whether it is improving or declining in revenues and earnings. Hours of operation, number of employees and other operating details should be included.
--Details of the lease or leases at property(ies) where the business is conducted, or terms by which the property can be purchased if owned by the seller and offered in connection with the business sale.
--List of assets to be included if an asset sale.
--Financial information includes balance sheet and profit and loss statements for the past five years and notes about any adjustments to stated earnings that reflect the seller's discretionary choices incorporated in the profit and loss reports. Copies of tax filings should be provided to verify information in the business financial documents.
--Marketing information should describe customer base, methods of marketing, competition and trends in the industry that might impact sales.
--Personnel information includes roles of employees, how long employed and information about any written employment agreements.
--Asking price and terms of seller financing, if any.
--Seller commitments offered, such as covenant not to compete and training agreement.
--Details of the franchise agreement if business offered for sale is a franchisee.
--Explanation of reason for sale.
CBR is a summary of facts and future outlook for the business being marketed for sale. It contains key elements of the business and details for buyer to review. It describes the company's products and services and profitability of the business. It should also have growth outlook and company's future in the market.
The CBR (confidential business review) is a tool used in offering a business for sale. Traditionally it is provided to qualified prospective purchasers of companies with asking prices of at least a few million dollars. But more recently, owners ready to sell smaller businesses such as coffee shops, retail stores, local service companies and many franchises, are preparing CBRs to aid in marketing their businesses.
A CBR that discusses a business for sale should not be handed to any interested parties unless qualified as legitimate potential buyers by the seller or a business sales intermediary representing the seller. To qualify a prospective buyer not only involves getting work history and financial statement, it also requires that the individual sign a non-disclosure form, promising the information disclosed about the business will be used only for analyzing the company as a purchase candidate and not shared with other people, except for professional advisors.
Included in the well-prepared CBR are these components:
--Overview of the company: Type of business, history, general description of location where the business is conducted, and brief statement about the business trend, whether it is improving or declining in revenues and earnings. Hours of operation, number of employees and other operating details should be included.
--Details of the lease or leases at property(ies) where the business is conducted, or terms by which the property can be purchased if owned by the seller and offered in connection with the business sale.
--List of assets to be included if an asset sale.
--Financial information includes balance sheet and profit and loss statements for the past five years and notes about any adjustments to stated earnings that reflect the seller's discretionary choices incorporated in the profit and loss reports. Copies of tax filings should be provided to verify information in the business financial documents.
--Marketing information should describe customer base, methods of marketing, competition and trends in the industry that might impact sales.
--Personnel information includes roles of employees, how long employed and information about any written employment agreements.
--Asking price and terms of seller financing, if any.
--Seller commitments offered, such as covenant not to compete and training agreement.
--Details of the franchise agreement if business offered for sale is a franchisee.
--Explanation of reason for sale.
These come in 2 forms in my firm. CBR's that are Anonymous and CBR's that have the Company info. included. This is typically dictated by the Seller. For the large deals, say, purchase price $1MM+ we >90% of the time craft a comprehensive 40+ page sales prospectus that packages the business for sale and goes into great detail on the methods of valuation, nuts and guts of the business opportunity (employees, Co. origin date, ownership paradigm, litigation, org. chart, key customer/vendor metrics, among other things), historical cash flows, etc...and this is all contained in the CBR. Obviously an NDA would always be required to secure the Confidential Business Review.
A Confidential Business Review (CBR) is a Summary of the various elements of a business; Clarifying Values is the goal of the CBR.
A good CBR will include income details and values of the individual elements; inventory, equipment and fixtures, leases or mortgages, information on any financing that might be assumed and expense information are all a part of this report. Also, anything that is important to the businesses continuing success. You may want to include information about key employees, especially if their relationship or skills are a critical part of your business.
Additionally, it should discuss trends in the business, disclosures on particulars of the business, the direction the business is currently headed and information about the future of the industry. The CBR should also discuss location and demographic desirability, the businesses competitive position, the upsides and demographic history and future changes.
In preparing this only, information that pertains to directly to the value of your business should be included. You will want to include promotional info but avoid adding fluff.
The CBR is a service to the Seller in the sense that it will define and clarify the details of the value of the business and will often lead to a higher selling price. It is also a service to the Buyer because the buyer can better see the justifications of the selling price.
The Confidential Business Review is designed to clarify issues that might otherwise be missed and possibly reduce the potential of the transaction failing or even future litigation.
