July 2010 - Usually business sales are once-in-a-lifetime events. For many business owners, the prospect of selling their business after years of hard work can be emotional and difficult. But this is not the time to take short cuts--it is critical to use the same care and patience that it takes to grow and sustain a business.
But fear not. Planning ahead and following a few key steps will make the process easier. Below is a list of 10 tips to help make the experience a positive and successful one.
1. Know the value.
Inflated expectations can interfere with an advisor's ability to negotiate the best value. A third party independent valuation will help establish the true market value of a business.
2. Carry on business as usual.
Don't become so obsessed with the transaction that you ignore day-to-day demands. Your eventual buyer will need to see a healthy business, not one suffering from neglect.
3. Keep the sale process strictly confidential.
A breach of confidentiality surrounding the sale of a business can alter the transaction dramatically. When clients, employees or vendors become aware of a potential sale they get nervous with the unknown and the natural instinct is to leave. Avoid this uncomfortable scenario by maintaining confidentiality.
4. Prepare for the sale well in advance.
Be sure your records are detailed and complete for at least the past few years and do all pertinent legal or accounting housecleaning, as well as a physical sprucing up of the plant or office.
5. Anticipate information the buyer may request.
In order to obtain financing, the buyer will need appraisals on all assets, plus information to satisfy any environmental regulations that may apply.
6. Achieve the highest price through buyer competition.
Because this can be tricky, you're advised to let your intermediary, as a third party, create a competitive situation with buyers to position you for the best transaction value.
7. Be flexible.
Do not be the kind of seller who wants all cash at the closing, especially given the current market conditions. Be prepared to provide seller financing and other creative financing solutions to attract the right buyer.
8. Negotiate, do not dominate.
Many business owners are used to being their own boss. But buyers are often used to having their own way, as well--which can cause conflict. With an intermediary's help, decide in advance what is most important and be prepared to give and take.
9. Know that time kills deals.
To keep the momentum up, work with an intermediary, an accountant, a lawyer and other experts who may be required to be sure that potential buyers stay on a time schedule and that any offers move in a timely fashion.
10. Be willing to stay involved.
Even if the process has been exhausting, realize that the buyer may want company owners to stay within arm's reach for a while. Consult with an intermediary to determine how to achieve a smooth transition.
Above all, remember that planning ahead is key. The best time to sell is when you don't have to. Too many business owners fail to plan for the day when they will want to sell. Then something happens (most often a health problem) and they are forced to sell quickly. Rushing to sell can result in a failure to recoup the true value of the business. MM
Domenic Rinaldi is president and managing partner of Chicagoland Sunbelt, a business brokerage firm that focuses on helping people buy, grow and sell businesses in Chicago and the surrounding Midwest area.
