Selling Your Business

Many business owners today fail to have a succession plan in place.  When it is time to enjoy the fruits of your labor, most business owners decide to put their business up for sale.

Here are a few things to consider before selling your business:

1. Have Independently Verified Books and Records Ready for Review

Buyers want proof of the sales and profits that the business has made in the past. And they will trust the information more, and critique it less, if the information is independently verified. This will also increase the number of potential buyers.

2. Price It Right

 

A business owner's natural tendency is to overprice their business. It happens all the time. While the price might look good to the owner, interested buyers won't express interest. They don't want to spend time negotiating down to a price that is more reasonable so overpriced businesses will sit on the market a long time and, perhaps, not even sell.

Due to this, it's best to involve others when setting a business's sale price. The term "others" could include additional executives from within the company, it could involve the company's trusted accounting firm or it could seek the expertise of business brokers who know how to value a business. Should an owner seek any outside professional service to value the company, there will be a cost. Most likely, the cost will be more than made-up for with a quick sale at the right price.

3. List Furniture, Fixtures, and Equipment

Buyers will want a complete list of equipment and will inspect it to ensure that everything is in good working order. Take the time to do these inspections prior to selling a business. Polish things up, have maintenance and repairs complete prior to putting a business on the market. This will give a prospective buyer less leverage for negotiating when the time comes.

4. Obtain a Professional Third Party Valuation

No one wants to spend unnecessary money when they are preparing to sell a business. But the facts on investing in the services of a business broker to independently value a business cannot lie. According to a recent study, companies that utilize a third party valuation when selling a business have an 80% chance of selling at a higher price. Those that do not choose to use a valuation not only miss out on a higher sale price, they reduce their risk of selling at all. The same study concluded that organizations that don't use a business valuation or mergers and acquisition services only stand a 17% chance of a sale.

5. Offer an Attractive Lease

Buyers will want a quality lease on the business's space. Whether the existing lease is assigned or a new lease is drafted, make this an attractive aspect of the deal.

6. Great Appearance 

Nice looking businesses sell first! Buyers deduct large amounts from their offering price for businesses that are in less-than- top shape. Keep the premises neat, clean and in good repair. And if it's not, clean things up before going to market.

7. Sign a Covenant Not to Compete with the Buyer 

A legitimate concern for buyers is the possibility that the previous owner may become a competitor of theirs after the business sells. Offering to sign a non-compete that includes an appropriate limit on the proximity and timeframe of such competition is appreciated buy buyers and is also considered a reasonable within business negotiations.

8. Have a Good Reason to Sell

Cautious buyers will want to know why the business is being sold; primarily because they want assurance that there is nothing wrong with it. Rather than hope such a topic won't come-up, address it first and have a good answer ready. Even if the reason notes some business troubles, the buyers will appreciate up-front honesty and can proceed in discussions knowing their dealing with an honest owner.

9. No Surprises!

Give interested buyers ALL the facts up front. Most negatives can be overcome if known by all parties from the beginning.