1. Know why you want to sell your business. Make sure it’s a good reason and not just to dump your problems into someone else’s lap.
2. Give some thought as to what you will do with your time after your business sells. Finding yourself with nothing to do can be very demoralizing.
3. Make certain that your taxes are current. This includes sales taxes, unemployment taxes, payroll taxes, state income taxes and federal income taxes.
4. Document all your policies, procedures and controls. Not only will this help during the transition period when you train the buyer, but this will make your business more appealing to the corporate buyer who is accustomed to formal documentation.
5. If possible, develop and train a strong “second in command” who can fill in for you when necessary. The buyer might be hands-on or hands-off, and having a strong assistant provides flexibility. Many business sales are lost when there is no depth of management.
6. Review each employee’s strengths and weaknesses and show when they were last reviewed and when they next need to be reviewed by the new owner. Not reviewing an employee on time can cause anxiety and diminish loyalty.
7. Make sure your financial statements and tax returns are “bullet proof.” You do not want the transaction to fall apart when the buyer or buyer’s CPA finds discrepancies.
8. Prepare a business and marketing plan that will help a new owner understand where the opportunities for growth exist. This plan should include an Executive Summary that explains why the business was started, how it progressed to its current status and what a new owner should do to take it to the next level.
9. Select an asking price that is based on reality – not fantasy. Be able to justify it based on a multiple of Owner’s Discretionary Cash Flow. Bad reasons include “it’s what I want”, “this is what I have in it”, “this is what I owe the banks” “I have put blood, sweat and tears over x years into the business.”
10. Be willing to be flexible on price, terms or both. Deal structure can make or break a transaction. When each party to the transaction is willing to bend, there is a higher probability of success.
Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.
Loren Marc Schmerler, CPC, APC is the former business advice columnist for Sam's Club. He has been a business broker since 1986 and works with business owners and business buyers in every state of the country. If you need assistance selling or buying a business anywhere in the United States, you can reach Loren at 404-550-1417, 24/7/365.
