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.