This article is one of a series that offers insight and guidance into the process of buying selling or valuing a business. Whether you want to buy, sell, or appraise the valuation of a going-concern business, these articles provide specific guidance and references to help you accomplish your goal.
Selling Your Business?
Follow These Ten Commandments to Avoid Wrecking the Deal
by Tom West
1. Place a reasonable
price on your business. Since an inflated figure either turns off
or slows down potential buyers, rely on your business broker to
help you arrive at the best "win-win" price.
2. 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 as long as a year, the buyer
needs to keep seeing a healthy business.
3. Engage experts to insure confidentiality.
A breach of confidentiality surrounding the sale of a business can
change the course of the transaction. Expert intermediaries can
channel the process and the parties involved to keep the sale within
safely silent bounds.
4. 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.
5. Anticipating information the buyer may
request. In order to obtain financing, the buyer will need appraisals
on all assets as well as information to satisfy environmental regulations
(when real estate is concerned).
6. Achieve leverage through buyer competition.
This can be tricky; you are wise to let your business broker, as
a third party, create a competitive situation with buyers to position
you better in the deal.
7. Be flexible. 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 intermediaries--their
knowledge of financing and tax implications-- to keep the deal sweet
instead of sour.
8. 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 way, too. With your business
broker's help, decide ahead of time when "to hold" and
when "to fold."
9. Keep time from dragging down the deal.
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. Consult with intermediaries
to determine how you can best effect a smooth transition.
About the Author
||Mr. Tom West is the editor/publisher of The Business Broker, a monthly newsletter for the business brokerage field. He has written or co-written numerous books including the The Business Reference and Pricing Guide and The Resource Handbook for Business Brokers. He is a founder, past president, and former executive director of the International Business Brokers Association (IBBA). He is a frequent lecturer and seminar leader on all aspects of buying, selling, or appraising a business. Mr. West is probably the most knowledgeable individual in the country today concerning the issues of buying or selling small to mid-sized businesses.
If you're considering buying, selling, or determining the value of a business, please take a look at some of the excellent books, reports, and software we have at Business Book Press to help you achieve success. For example:
The Business Reference and Pricing Guide is the bible of the business brokerage world. If you're a shrewd business buyer or seller, you will want this book to learn what just what the business broker knows. It will pay you big dividends throughout every aspect of the purchase and sale process. Learn more about it...
BizPricer Business Valuation Software is an accurate and inexpensive resource for prospective business buyers and sellers (and business brokers) who want to know the fair market value of a business. No financial expertise or specialized knowledge is needed. Save hundreds to thousands of dollars over hiring an appraiser to provide you with a similar result. Learn more about it...
Preparing A Business for Sale provides business owners with an understanding of the process they need to know to sell their business for the most money. Contains hundreds of little known tips, ideas and strategies to maximize the selling price of a business. Learn more about it...
Strategies for Successfully Buying or Selling a Business is our bestselling book. It has been recommended by Kiplingers Personal Finance Magazine, the BottomLine Personal Newsletter, and has been awarded the Best Business Book of the Year Award from the North American Bookdealers Exchange (NABE). Learn more about it...
Anatomy of a Business Purchase Offer provides you with all of the practical hands-on knowledge you need to make a successful purchase offer to buy a business. The author uses an actual Purchase Offer form to show you exactly what needs to be written and why! He details all of his recommendations in a line-by-line format for each and every aspect of the purchase offer. Learn more about it...
The Business Buyer's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully buy a business.
The Business Seller's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully sell a business.