Selling Your Business? Follow These Ten Commandments to Avoid Wrecking the Deal
Place a reasonable price on your business. Since an inflated figure either turns off or slows down potential buyers, rely on your professional service provider to help you arrive at the best "win-win" price. Remember, a transaction will consummate only when a buyer and seller come to reasonable terms.
Carry on "business as usual." Don't become so obsessed with the transaction that your attention wavers from day-to-day demands, affecting sales, costs, and profits. Since the selling process could take six to twelve months, the buyer needs to keep seeing a healthy business.
Engage experts to insure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Professional intermediaries can channel the process and the parties involved to keep the sale within safely silent bounds.
Prepare for the sale well in advance. Be sure your records are complete for at least several years back and do all pertinent legal or accounting "housecleaning"--as well as a literal sprucing-up of the plant or store.
Anticipate information the buyer may request. Most buyers will require three years worth of financial data including tax returns. In order to obtain financing, the lender will require a business appraisal as well as a real estate appraisal including an environmental assessment (where real estate is concerned).
Achieve leverage through buyer competition. This can be tricky; you are wise to create a competitive situation with buyers to strengthen your deal position. In actuality, one buyer is no buyer. The sales process should stimulate multiple buyers with multiple offers.
Be flexible. Remember the forgotten Beatitude: “Blessed are the flexible, for they shall never get bent out of shape.” Don't be the kind of seller who wants all-cash at the closing, or who won't accept any contingent payments or an asset transaction. Depend on the advice of your professional service providers--their knowledge of financing and tax implications-- to keep the deal sweet instead of sour.
Negotiate; don't "dominate." You're used to being your own boss, but be prepared to learn that the buyer may be used to having his/her way, too. With your consultant's help, decide ahead of time when "to hold" and when "to fold."
Keep time from dragging down the deal. Time kills all deals. To keep the momentum up, work with your intermediary to be sure that potential buyers stay on a time schedule and that offers move in a timely fashion.
10. Be willing to stay involved. Even if you are feeling burnt-out, realize that the buyer may want you to stay within arm's reach for a while. Most transactions will require the seller to assist in transitioning for up to 90 days -- sometimes longer. Determine in advance how you can best affect a smooth transition.
