Selling your Business - 10 point plan

1.      Start planning the process early, you are not going to live forever. Many owners wait way too long and allow an unexpected event to force the sale of the business, usually with a poor outcome.

2.      Financial reports should be timely, clean and clear. Income statements and balance sheets need to be up to date and free of personal expenses. Three years of accurate reports will be required for any buyer and their lender.

3.      Get either a business valuation or evaluation, in advance of selling. It is worth the money and will help you understand how your business is viewed from an outside perspective.

4.      Be open to provide some level of financing. This demonstrates your good faith in the business. Most business sales are comprised of about: 20% buyer equity, 60% lender financing, and 20% seller financing.

5.      Size matters. To attract more interest and command higher selling multiples your business needs to be at a sustainable level. ($1 million revenue plus) Most buyers are not interested in simply buying a job.

6.      Profitability matters. Businesses that are cash flow positive and generate an income statement profit, will create more interest in the market and command higher selling multiples. Work with a CPA to help you, not simply a bookkeeper or tax preparer.

7.      Create an established transferable sales and marketing channel. It will be detrimental if your business revenue is closely related to your personal customer relationships.

8.      Try to remove yourself from the daily operations of the business. You may need to hire a key person or better employees. Will the business continue to run if you’re not there? Work on the business, not in the business.

9.      Look for related buyers that know your industry. Consider your suppliers, customers, and competitors. Business brokers will be happy to list your business, but be prepared to pay 10% plus for their services.

10.  Consider a key employee sale, with a buy in, buy out contract. This is usually one of the best options that will maximize your pay out over time, keep your hand in the business, and reduce your tax liability.