Q: When should I sell my business?
A: When you and the business are up. To maximize your profits, market when you are doing better than ever Selling begins well before you have to sell – by wisely reducing costs and increasing revenue. It’s always nice to go out on a high note.
Q: I’ve identified a buyer. Do I still need help during the sale process?
A: There are generally two ways to approach a transaction with a known buyer or known potential buyer. One is to work directly with the buyer, with support from professional. The other is to bring in an intermediary. This intermediary could be an experienced valuation professional or broker or another advisor who has valuation skills and transaction management experience. In either case, prepare just as you would when listing for sale: have your books in order; know the value of the business; have potential buyers sign non-disclosure agreements; and have professionals at your side to protect your interests.
Q: I have a buyer! Can I announce the sale now?
A: Until the deal is closed, the sale is not complete. Even after you have a buy-sell agreement, the business is not really sold. Anything can go wrong between the buy-sell agreement and the close of the sale. If you have elected for confidentiality, be very careful before you let the proverbial cat out of the bag. And keep running the business just as you would.
Q: What do I tell a buyer about my business? Does it matter if they are known to me or not in what I share?
A: Whether or not you know the buyer, and even if they are someone who has knowledge of the business, have talking points to share. Have a clear, honest explanation for why you are selling. Know what has transpired over the years and be able to go right to the source of information. Include the highs and the lows. And understand what the next generations of the company might look like when you leave.
Q: What financial information should I provide?
A: Have your books and systems in order. Inconsistent or messy records, or any unknowns can turn off a potential buyer. They’ll buy a different business that has a clear picture demonstrating history and performance, so keep tidy records. Knowing where you have been helps you have a successful business for sale in the future. Knowing where you stand today helps you know where you are going tomorrow.
Q: Do I need a business plan to show a buyer?
A: Having a business plan is vital. In today’s dynamic business environment, a two-year plan is probably all you can responsibly do. But whether you look out one year or fifty, having a business plan that accounts for potential obstacles and opportunities shows a buyer that the business is viable. A business plan should include these elements at a minimum:
- Marketing–how you let your market know what you do and how you do it
- Finances–where you are going to find and spend resources
- Staff–those who are going to do your business, as employees or contractors
- Services/products–what you are doing or selling
- Service area–where you are going to conduct business (physical or virtual)
Q: Why is due diligence necessary for sellers?
A: As critical as it is for a buyer to do their homework, so should sellers. You may want to pre-qualify a buyer before you give them specific information about the company. And if you want confidentiality, the fewer people involved, the better. Due diligence ensures that buyers have the financial ability to purchase the business and, particularly if you are going to help finance the sale, that they have the expertise to successfully run the business.
Q: Should I have a buyer sign a confidentiality agreement? Why?
A: Sellers want anyone they work with to sign a confidentiality agreement. Even known buyers may not understand the need to keep confidential the details of the business, that the business may be sold, etc. Plus, as a seller, you have the obligation to keep confidential the fact that a buyer is talking with you – consider whether they have a job elsewhere and may lose it if their employer knew they were looking for a job. Confidentiality agreements routinely cover immediate family, lawyers and CPAs, too. These latter have a professional commitment to keep confidences. Need a confidentiality agreement – just ask!
Q: Can you help me find a qualified professional to list my business for sale?
A: Absolutely! Usually, such a relationship is with one individual who will represent your business internationally. We have collaborative relationships across the country and will help you find the best fit.
Still have questions? Just ask! Contact us today.
Ready to sell?
Three of the top drivers for business value:
- A steady and growing revenue stream over three years or more
- An increasing net to owner gain over three years or more
- Clearly demonstrated performance through tax returns
Ask us if your business is ready to sell.