Ten Steps to the Successful Sale of a Business
Make sure you have a valid reason for selling your business.
decide to sell because you have had a bad week or because moving
closer to the grandkids sounds like a good idea. Also, don't decide to "test the waters" just to see what sort of price your
business will command. Before you decide to sell your company, focus
on your true objectives. The first thing a prospective buyer will
want to know is the reason you are selling. The more valid the reason
you offer, the more serious the buyer will be.
Don't wait until
you have to sell, for either economic or emotional reasons.
want anxiety to force you into accepting a deal that's not good for
you--or for the buyer. During the two months preceding the new year, sellers
always say that they don't want to sell until the after the first of the year.
This delay can be an unfortunate one.
Once you have made the decision to sell--and before talking to your
business broker-- you should gather the information needed to market
and subsequently sell your business. Here's a list of the key items:
- Three year's profit and loss statements
- Federal income tax returns for the business
- List of fixtures and equipment
- The lease and any lease-related documents
- Copy of the franchise agreement (if applicable)
- List of loans against the business with amounts and payment
- Copies of any equipment leases
- An approximate amount of the inventory on hand
- Names of outside advisors
Remember that you
are part of the marketing team.
Your business broker can't do it all--and
might even ask you to come to an office meeting to tell the rest
of the staff about your business. Follow your broker's advice about dealing
with prospective buyers--there's a right and a wrong time to meet
works both ways.
The broker will constantly stress confidentiality
to the customers to whom he or she shows your business. However,
as the seller, you must maintain confidentiality about a pending sale
in your day-to-day business activities.
You, as the seller,
should put yourself in a prospective buyer's position.
The next time
you go to your place of business, pretend you are a buyer looking
at it for the first time. How impressed are you?
because you are selling, now is not the time to let the business
slip. It's important that prospective buyers see your business at
its best: bustling, and showing no signs of neglect. Here are a
few areas to focus on:
- Keep normal operating hours. There is a tendency for sellers
to "let down"
- when they put their business up for sale.
- Repair signs, replace outside lights, and do a general spiffing-up
for first-impression purposes.
- Tidy the outside premises (if appropriate).
- Spruce up the interior as well.
- Repair non-operating equipment or remove it.
- Remove items that are not included in the sale.
- Maintain inventory at constant levels.
an outside professional who understands the sales process.
David Gumpert, former
Harvard Business Review associate editor said,
"Inexperienced lawyers are often reluctant to advise their clients
to take any risks, whereas lawyers who have been through such negotiations
a few times know that's reasonable." If you are going to use
a lawyer, use one who is seasoned in the business sale process.
You need to keep the ball rolling once an offer has been presented.
it closely. Just because you didn't get your asking price, the offer
may have other points that will offset it, such as higher payments or interest,
a consulting agreement, more cash than you anticipated or a buyer that you are
comfortable with. You have probably spent years building your business--you want
it to continue to be successful. The right buyer may be better than a higher
price, especially if there is seller financing involved, and there usually is.
If you must counter-offer, do so only on those points that are really important
to you. Be willing to "horsetrade" if you must to complete the deal.
There is an old adage that the first offer you get is probably the best
you will ever get--and it's true.
Remember that most successful transactions are successful because
they create a win-win situation for everyone involved.