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| Eddie Quigg, CPA/JD |
Preparing a business for sale is more of a process than a task, and more importantly, it is usually only done once. One and done. That alone inspires deep dread for most owners, who have spent a lifetime refining and improving a single product or service—the business and its future. Let’s face it, no one likes to deal with their own mortality, and selling a business requires us to do just that. Accordingly, to stress its importance, this list begins with the soft stuff—the psychology of selling a business, and ends with a few practical suggestions—the harder stuff that most owners find is easier to implement.
The Head Game(s)
1. To make it to the end, start early. Selling your business is a process that can take months, even years. It starts with answering the following questions—Do I really want to retire and leave this business, am I really done, is the end in sight? Do I want to sell to my employees, or try and keep the business in the family—are they, or will they be ready to take over when I’m ready to let go and move on? The earlier these questions are asked, the sooner they can be acted upon.
2. Be Objective. Set your post-retirement goals and aspirations, and then crunch the numbers to see if they are a match, not the other way around. Many owners have unrealistic visions of buying that beach house in Hawaii, as well as maintaining the condo close to the grandkids, which can lead to equally unrealistic expectations of what the business is really worth. Making sure the retirement dream will work depends on your willingness to get an honest appraisal of the value of the business. The opposite also applies, some owners set the price of their business too low, which can often lead to seller’s remorse, and a busted deal, which will unnecessarily prolong the process. You may think you know what your business is worth, but getting a professional appraisal is a necessary step, for both the seller and the buyer.
Practical Tips
1. Get your Financial House in Order. Ask yourself how your business will look to a prospective buyer, and act accordingly. Trim unnecessary expenses, especially those personal expenses such as club dues, excessive meals and entertainment—and control your expenses in general to make the bottom line look better. Plan early to divest the business of “other assets” like investment portfolios, land , and real estate used in the business. The buyers’ focus is on the revenue producing assets and liabilities of the business, the extras are a distraction that sends the buyer the wrong message, like a cluttered desk indicates a cluttered mind. This extends to the office, the plant, even the landscaping and signage.
2. Documention and Transparency. Make it easy for a prospective buyer to see how your business works. Document key processes and procedures, including the duties that key employees that are responsible for and how all these systems contribute to the success of the business. Include key documents such as leases, supplier contracts, employee contracts and manuals. Be prepared to answer the buyer’s questions, the same questions that you would ask if you were buyer.
3. Get Help! Selling the business is a team effort, and requires an experienced team to get you successfully to the finish line. Make sure your CPA and attorney are qualified to handle the sale, and if you employ a business broker, thoroughly investigate them before committing to a contract of representation.
Conclusion
The final step in the life of your business requires the same level and degree of commitment and preparation that you had when you started it, don’t let the end of the dream become a nightmare—prepare yourself!
