Here are a few important topics to consider when preparing yourself (and
your business!) for the sales process. 1. Be ready to sell. There is no
sense going through the motions if you are not mentally and financially
committed to selling the business. Discuss the sale with your spouse or
partner in advance. Evaluate your financial needs so there is less
hesitation once an attractive offer comes your way.
2. Discuss your goals with your advisors before you have an offer. To
avoid delays and misunderstandings, do not wait until you have an offer in
hand to consult your advisors. If your attorney is not well-versed in small
business transactions, interview others. You are unlikely to reach the
closing table if your advisors do not clearly understand your ambitions.
3. Understand the true value of your business. Most owners have no idea
of the value of their company since small business valuations can be an art
AND a science. Consult a business sales professional (who is typically NOT a
tax accountant or business attorney) for an explanation of how small
businesses are valued as a multiple of seller’s earnings.
4. Update your company’s financial statements and understand the nature
of you firm’s revenues and expenses. a. Buyers will typically require 2 to 3
years of financial statements (profit-and-loss statements, balance sheets
and/or tax returns) for their evaluation. b. Make sure you have supporting
documentation for nonoperational expenses (fringe benefits such as your
personal health insurance). c. Prepare a simple list of the business’s
important furniture, fixtures and equipment. d. Document your inventory. If
it is stale or obsolete, put it on sale or donate it. Your inventory should
be lean and moving. e. Clean-up your accounts payable and any pending legal,
employee or environmental issues.
5. Organize your legal paperwork such as operating licenses, property
leases, customer agreements and insurance documents.
6. Consider your employees. Decide how and when you will communicate the
sale with your employees. Because of the uncertainty involved, most business
owners wait until the sale is imminent (or done) before sharing the news
with their employees. A buyer is likely to keep your employees after the
sale is completed, so treat employees with respect during the sales process
to avoid any last-minute issues.
7. Improve your curb appeal. Tidy your working space – first impressions
make a big difference!
8. Brainstorm on ways to grow the business. All buyers are looking for
ways to add to the work you have done by improving sales or cutting out
unnecessary expenses. If you have ideas, be prepared to discuss them with
the potential buyer.
9. Know why you are selling and be prepared to tell the prospective buyer
your reasons. Most buyers are curious to why you are selling and will ask
for an explanation.
10. Run your business as you normally would – now is not the time to take
long vacations or let sales slip!
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Ryan Cave, MBA is managing director of Sunbelt Business Brokers of
South Florida, a business brokerage firm specializing in the purchase and
sale of small to midsized businesses. Sunbelt has been involved in the
valuation and sale of privately-held businesses for over ten years. He can
be reached at (561) 994-5300.
www.sunbeltnetwork.com
