The 10 Things Business Owners Must Know Before Selling Their Business (Part 2)

A few days ago I shared the first five must knows. Today I will reveal the second half of the list. I received some great feedback from the first article and I hope this one will prove to be helpful as well.

To recap, if you are in a position of having to sell your business to an outside third party, you need to have a thoughtful plan in place sooner rather than later. This list of must knows will help you formulate that thoughtful plan.

Here are the first five again. (The article explaining some reasons why these are important can be found at this link - https://bit.ly/2EbgC2y )

1. Knowing When To Sell

2. Knowing How Long It Will Take To Sell

3. Have A Realistic View of Value

4. Have A Realistic Business Plan

5. Have Realistic Projected Financial Statements

6. Know If Your Management Team Is Ready - You need to know if your management team and key employees will be ready when you are. These employees WILL be interviewed by potential buyers. You need to make sure you have the right people in place and that those people are prepared for the questions that will be coming their way. It is important that everyone is reading from the same script during these interviews, and you should handle any concerns your management team may have well in advance of those interviews. Having said that, when and how to tell them your intentions is another thing that needs to be carefully coordinated.

7. Understand Both Internal & External Confidentiality - Usually near the top of the list is the seller's concern with confidentiality. There is a multitude of reasons that you will want to keep your intentions confidential. For obvious reasons, you will not want your customers, competitors, and employees finding out too soon, and for that reason, you will not want anyone else finding out either. This is always a hot topic, and there are ways to increase the probability of keeping things under wraps if you follow a proven process.

8. Understand What Investment Bankers & Business Brokers Do - Many business owners are aware that business brokers and investment bankers exist, but most do not know the exact role they play in a sale transaction. Hiring the right professional to help you with this transaction may be the most important decision you make, and to do that you need to understand what they bring to the table. They help you prepare, package, market and find potential buyers for your business. They are skilled at helping bring leverage to your side of the negotiating table and allowing you to focus on business as usual throughout the lengthy process.

9. Understand Your Total Financial Impact - One of the eye-opening experiences that many business owners have when preparing their business for sale is the exercise of listing all the Owner Benefits they are receiving from their business. As with the vast majority of closely-held businesses, owners receive financial benefits that go beyond their W-2 compensation and distributions. You should crunch the numbers to make sure the price and terms you are expecting from this sale will help cover enough of the seen and unseen, or forgotten, benefits you currently receive from your business. It will be important to speak with your Wealth Advisor/Financial Planner to make sure you understand what your financial life will look like after the sale. I have seen the timing of a sale modified on a number of occasions as a result of this analysis.

10. Understand That A Sale May Not Happen - Just because your business is for sale does not mean you will find a buyer. It was mentioned earlier, but selling a business is a complex transaction that comes with significant investment and commitment on the part of the buyer. Even when you identify a good potential buyer and that buyer provides you with a Letter of Intent (LOI) and performs their due diligence, there are no guarantees they will buy. Many things can happen that are beyond your control during a sale process, the economy, technological advancements, lawsuits, divorces, illness, major weather events, political disruption, the list goes on. Your hired professionals may run a perfectly good process and discover that the market is simply not providing you with adequate buyers at that time. With this result being a real possibility, it becomes even more important to engage with the right professional to increase your chances, to maintain confidentiality for a long as possible and for you to continue running the business as if you will continue to be the owner moving forward.

As I am sure you are well aware, this list of 10 Must Knows is simply that, ten of the things you must know. There is plenty more to know, discuss and clarify if you are considering the sale of your business in the next five years. The business owners that plan ahead are much better prepared to sell on their terms, and they are also better prepared to field an unsolicited inquiry or offer from a buyer that comes to their doorstep unexpectedly.

I am talking with business owners nearly every day that are wanting to approach this process with their eyes wide open and with their best foot forward. Please do not hesitate to reach out to me if you would like to discuss the plans you have for your business.