Due Diligence: Clean the Joint Up

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Preparing for a Sale
Last week’s post was intended to cover a broad range of due diligence issues but they all, at bottom, were essentially intended to eliminate confusion and uncertainty on the part of a buyer; to reduce the perceived risk the business represents and to present the business in the best light. This is part of the preparation work that goes into selling a business and where a professional business broker would be very helpful. After all, professional business brokers do this stuff all the time._____________________________________________________________________________
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Though transparency is a worthy goal in this endeavor and certainly should be front and center when pertaining to the financial records and contracts, by “cleaning the joint up”, I mean something more basic. The best example I can think of to illustrate what I mean is an owner’s efforts and preparation when selling a house. If you’ve ever sold one, I expect you’ll be able to follow along with this example.
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The Process of De-Cluttering
Few people will sell more than one business in their lifetime but most people will sell more than one home. To understand what I mean by “cleaning the joint up”, think about it in terms of selling your house.
De-Clutter the Business
The objective is to show the business in the best possible light – from clean and organized books to pleasant colors in the waiting room. Remember that you want the buyer to “imagine” him- or herself owning the business. Remove as much of the seller’s personal stuff as possible. If the walls are covered with memorabilia, get rid of whatever does not directly pertain to the business.
The Buyer’s Team
The buyer of a business is unlikely to visit alone. If the buyer is a financial buyer and is considering a business as a “first time” buyer, he or she will likely have a spouse, knowledgeable friend or professional advisor along. If the buyer is a strategic buyer, there will probably be multiple people from the acquiring company on that first visit – and on subsequent visits. One or more of these visitors will probably use a restroom. Need I say more about this??Success! Now check your email to confirm your subscription.
“Stage” the Business

The Bottom Line
Like selling a house, if you want the highest price for your business it has to look good – both operationally and physically. If you walk through the business and you realize it looks like crap, you can be sure that, because you’re biased to the good side, it looks worse than crap. And a buyer – biased through skepticism – will see it that way or worse. From the operational standpoint, make sure you have the necessary talent lined up. For the physical side, use some of that talent – specifically the professional business brokers – to advise you on how the business should be presented._____________________________________________________________________________
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If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!
Joe
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