When selling a business, time is not your friend. Time is the enemy of all deals. In fact, "time wounds all deals" is an expression that can be associated with a number of different industries, but is especially relevant to business acquisitions. So, the key to a successful deal is to prepare well, come out strong and maintain momentum throughout the business sale process. The deal clock is set in motion as soon as your company hits the business-for-sale market, not later in the process when a buyer presents the first offer.
So, to generate deal momentum, a business owner should be ready for the trip to the marketplace before the train leaves the station. This means organize your documentation and vet potential roadblocks that can derail or delay reaching the done-deal destination.
Don’t let time work against you. Ready up with these 14 karats of knowledge so when the sale train does leave the station, it will have the momentum necessary to reach a timely closing:
1. Know when it is a good time to sell YOUR business. Usually, the best time to sell is when sales and profits have been increasing each year and signs indicate the trend will continue. Current market conditions also play a role in prices paid for good businesses. Since "today’s market offers the best environment for small business sales that we’ve seen in years," selling a little early in order to ride the rails of a good market may be a better risk than waiting for the next train that may never come. Lance Tullius, managing partner of Tullius Partners, spells out the all-too-familiar scenario of waiting too long in his article, "Sell Too Early."
2. Know why you want to sell. A committed resolve to sell is essential. One of the first questions buyers ask is, "Why is the owner selling?" They ask this question to measure, in their minds, the probability that there may be skeletons in the closet.
3. Know the company’s best features and its blemishes. Yes, highlighting the awesomeness of your business should take center stage. But no company is perfect. Be ready to disclose the warts too. Buyers do not like surprises, nor do business brokers or other members of the professional team involved in the sale process. Problems uncovered late impugn your integrity and threaten the price - and the deal. The more issues brought to the table and worked out in advance, the better chance of a smooth closing.
4. Know what you will do after your business is sold. If you don't have a plan in mind, you might find yourself getting cold feet or feeling a little off balance when that first offer comes along. Be sure you won't balk when momentum starts picking up.
5. Know the value of your business. Get a business valuation by a reputable firm to understand what to expect in the current marketplace. This is an initial step in determining if the sale would meet your objectives.
6. Know that your asking price is based on reality.... …a reality that buyers and their lenders can believe in. The buyer will look at return on investment and their lenders will require that the deal make sense in terms of debt repayment. Over-priced businesses do not get sold.
7. Know that you are current on all taxes. This includes sales taxes, unemployment taxes, payroll taxes, state income taxes and federal income taxes. Delinquencies in taxes of any kind can stop a deal in its tracks.
8. Know that operational details are not just in your head. Buyers want organized records, files, contracts, policies, employee records, training manuals, how-to manuals, business processes, systems and controls that are reliable and organized to keep things going after you're gone.
9. Know that your business can operate without you. The value of a business is built upon the sustainability of operations without its leader. Key employees and staff who run daily operations are the key to its future. Most businesses are unsellable if the owner is the business.
10. Know who you are, who you are like and who your competition is. Buyers will survey your company’s landscape to scope its position in the market.
12. Know that your team is ready. Be sure that your trusted advisors will be able to assist you in the transaction. A meeting with your attorney and accountant, for instance, will play a role in gathering all necessary documents for your business broker before going to market. Your team of advisors needs time for preparation in order to effectively support you in the transaction.
13. Know that you can provide the road map to even greener pastures. Buyers are interested in the future. A growth plan and marketing plan will help a prospective buyer understand where opportunities exist and what could be done to take the business to the next level.
14. Know what's most important to you in the grand bargain. Be prepared for the pull and tug. Don't get bogged down in minor details. Stay focused on your key issues. Understand your absolutes vs. wishes. Such preparedness will go a long way while negotiating the different scenarios on price and terms. How the deal is structured to meet the needs of buyer and seller can make or break a transaction.