Selling a Business: Ways to Prepare

“Why Are You Selling?”
Every potential buyer I’ve encountered since founding Worldwide Business Brokers in 2001 has, at some point, asked our client this question. You don’t want to say that there’s too much competition in the marketplace or that your employees don’t show up for work or that your suppliers are shorting you. Your answer should be more along the lines of, “I’m ready to retire”; or “My wife/husband and I have long dreamed of starting an armadillo rescue operation in Arizona and we feel now is the time to make that move.” You could say you want to sail around the world before you get too old or simply that you’re ready to slow down. The point here is to realize that something about the business or the market may be discouraging to you but be seen as a challenge by a buyer – a way to increase the value of what that buyer is buying.Get a Valuation Done
If you don’t know what your business is worth, you’ll either leave money on the table or own that business for a lot longer than you want to.
Gather and Organize the Paperwork
Any rational buyer will want to know pretty much everything about your business; not only it’s current condition but also its history. The basics here are:- Financial statements (3-5 years)
- Tax returns (3-5 years)
- Lease
- Contracts
- Employee records
- A list of assets, tangible and intangible
- Inventory
- Accounts payable and receivable.
- Why did you start the business?
- What challenges have you overcome?
- What goals have you reached?
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Call in the Pros
As I said at the beginning of this epistle, selling a business ain’t for sissies. A business owner trying to sell his or her own business is like a dentist trying to replace his own knee. You’re good at what you do. Don’t pretend to be good at what you DON’T do. In order to get the best outcome when selling a business, you have to understand how to structure the deal properly, how taxes factor into that structure, how financing the acquisition works and how it can be massaged to your benefit. How can you reduce capital gains taxes? How can you protect yourself from ongoing liability – from everything from the business’s creditors to environmental issues? All these things and more require talent experienced in the purchase and sale of businesses. Make a list of who you need to call to line that talent up before you need it.Is Your Business Finance-able?
Taking care of this during the preparation stage will go a long way toward making the transaction less emotionally fraught. There are two ways to do this.
The Bottom Line
If you want to sell your business and want to get the highest return for all the work you’ve put in to building it, you must spend time getting it prepared – from the essential documentation to its physical appearance. And this doesn’t even include the need to get yourself ready for the sale. Such preparation involves anticipating what a reasonable buyer will want to know and what questions he or she is likely to ask. When selling a business, it’s best to enlist the help of professionals with the experience to prepare you for the process. If you have any questions or comments on this topic – or any topic related to business – I’d like 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 safe and profitable week.
Joe

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at joe@WorldwideBusinessBlog.com