Determining
If You Are Ready to Sell 
The
first step in selling your business is to decide if this is really
what you want. It is important to be clear about your reasons
for sale because one of the first questions a buyer asks is "Why
are you selling?" While you have a good reason to sell,
it is also important to assess if you are ready to sell. To make
this determination sellers should ask:
- What
kind of transaction would I like to see happen?
- How
long can I wait for the right deal?
- How
much risk am I willing to take?
- How
much tax am I willing to pay?
- Should
I sell only part of the business?
- What
will I do with the proceeds?
- What
would I personally do after the sale?
- Do
I need or want to work with the new owner?
- Re
there other opportunities I would find more personally rewarding?
Contemplating
a sale means much more than money that can be made. You also
need to asses the impact on your lifestyle and family situation. |
Preparing the Business for Sale
Once
you've determined you are financially and psychologically motivated
to sell, you can begin the selling process. To make sure the
business is presentable to potential buyers, begin to analyze
the business from a buyers perspective. Ask yourself what kind
of assets and information need to be strengthened to make the
business more attractive. More specifically:
- Clean up the financial statements. Make sure
you have 3-5 years of clean and accurate statements available.
- Gather pertinent business information. Buyers
will want to know such things as the skills and experience of
the staff, the number and tenure of your employees, the size
and value of your facilities, the market value of your assets,
and or the type of manufacturing equipment available inventory,
etc..
- Physically improve the looks of the facilities.
Put new paint on the walls, make sure the equipment is clean
and running well and tidy up office space.
- Document your business processes. Many buyers
will expect you to produce a business manual that details how
your business is run. Take the time to document all the steps
in your business cycle, including design, ordering, manufacturing,
shipping, sales, disposal, billing, customer service etc...
- Prepare a business and or a marketing plan.
Buyers will want to know what you would do to continue growing
a business. Document your marketing strategies, identify your
major customers, pull together information on industry and customer
trends and indicate how you might increase sales, develop new
products or open new markets.
- Obtain an accurate and up to date business
valuation. To avoid selling your business a huge loss - or pricing
yourself out of the market, sellers should obtain an accurate
ad unbiased third party valuation done by a professional skilled
in the practice.
Once you've cleaned up the
plant or facilities, gotten your books in order and pulled together
all the necessary business information, you can start to think
about the actual sales process. Here the message from experienced
owners and advisors is clear: Don't try to sell the company on
your own! |
 Six Questions Most
Often
Asked By Buyers
Sellers
need to be prepared to answer the following questions:
- Why
are you selling?
- Will
management remain after the sale?
- Are
the financial statements accurate and current?
- Are
there EPA, OSHA or EEOC issues with the business?
- Is
Seller financing available?
- What
is the asking price?
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 Working With
an Advisor
Since
most entrepreneurs will only sell one business in their lifetime,
it makes sense to hire a professional to assist in the sale of
your business. Unlike a house that can be listed in a newspaper
for all to see, sales of private companies are most often kept
confidential. The right advisor can help you anonymously locate
the type of buyer that best fits your company's goals. In fact,
the best advisors also work with people who actively are looking
to buy qualifying each both professionally and financially before
ever presenting them to the seller.
Working with an advisor also frees you time to concentrate on
running the business. After all, if you are focused on selling
the business, profitability could suffer, driving the value down.
There
are three types of advisors who can help entrepreneurs sell the
company:
- Business
Brokers: Brokers take a percentage of the selling price and will
be motivated to find the right buyer at the highest price
- Investment
brokers: Bankers typically work with owners to determine the
mast appropriate buyer. Some bankers work for a fixed fee; others
charge a percentage of the sales price.
- Intermediaries:
The role of intermediaries is to introduce the buying and selling
parties and help them negotiate the best deal.
If
you can find an advisor who is experienced in the industry, has
a good track record and can help you put together a solid presentation
package, the investment will be well worth it.
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 Surviving the Sales Process
Once your business
has been spruced up, packaged and put on the market, the hardest
part of the process begins. This is not only because you have
to keep focus on the business as well as responding to buyers,
but also because this is the point at which most sellers start
to second guess themselves.
The emotional upheaval
can be difficult for other reasons as well. For starters, it
can be tough to keep the sale a secret from employees, suppliers
and customers. Employees and customers can get nervous and start
looking elsewhere for jobs and products. This can make the business
appear vulnerable at the time it needs to look its best. Another
problem occurs when buyers pressure sellers for their asking
price.
It's also difficult
for many owners to remain patient during a process that can take
anywhere from three months to two years.
 After
the Sale
After the deal is closed,
most buyers prefer that the seller stay on as an employee or
consultant for anywhere from six months to two years to help
with the transition. The amount of time can be negotiated but
this may conflict with your goal to spend less time on the job.
Also don't be surprised if you find yourself antsy to start a
new venture. You have been successful because of your drive,
passion, determination and vision and it's just not easy to turn
off those qualities. Many of the people with whom we deal as
buyers are people who sold their businesses and got bored staying
at home watching their money grow in certificates of deposit.
It doesn't take long before most entrepreneurs are champing at
the bit to get back in the game.
The Michael
James Group, LLC
P O Box 146
Richmond, MA 01254
Phone: 413 698 2330
Fax: 413 698 3622
E-Mail  |
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A
One Stop Shop for Small Business
|
The Michael James Group, LLC. 
