Making the Decision
There probably isn’t an owner who hasn’t at one time or another thought of selling their business. The pressure of owning a business can be difficult and the stress of the day to day operations becomes overwhelming at times.
For most owners, however, the urge to sell passes. You eventually find solutions to the problems and there is always the fear of the unknown if you do sell. Still, there still may come a time when you can no longer run the business or operate with enthusiasm.
Why do you want to sell? It’s important to understand your real reasons because there are often options. For example, if the business is operating at a loss or is heavily indebted the solution may be to retain a consultant to structure a turnaround. Tired or burnt out? The answer may be a partner or manager. A partnership feud, as another example should not prompt a sale of the entire business but a buy-out of the partnership interest. Look for the alternatives with your advisors and family before you commit yourself to a sale. You can always proceed with a sale, but you cannot undo a completed sale. If the reasons for the sale may be temporary, give yourself six months to reach a final decision.
The decision to sell can be difficult but it’s only the first of many difficult decisions
• Should I tell my employees?
• What should I do to dress up the business?
• How can I improve my financial statements?
• Can I legally sell the business?
• What price and terms do I want for the business?
• How can I best “package” the business to sell?
Early Actions to Take
Before you can begin to market the business, you will have some homework to do. It may take you several months to “position” the business for sale, but that can be time profitably spent. The properly positioned business can sell much faster and for much more than the poorly presented opportunity.
What should your first steps be?
1.) Test the Market: You can’t intelligently put your business on the market until you know how competitive the market is and what comparable businesses are selling for. Spend two or
three months pretending you’re the buyer. You’ll develop a sense of what your business will sell for.
2). Develop a Team Approach: If you have partners, make certain you are each in agreement not
only on the decision to sell, but the key terms of sale as well. Involve each of the partners in
the buy-sell process by delegating to each specific responsibilities in positioning the business.
3). Consider Your Employees: Should you tell your employees? You, of course, have two choices.
Don’t say anything or tell them exactly what you are planning to do. There are pro’s and
con’s to each approach. If you don’t tell your staff and word gets out, your employees will
feel betrayed. On the other hand, disclosure may create job insecurity prompting employees
to leave. This decision requires judgement. however, many experienced sellers suggest it is
best to tell key employees and long-term staff members on a confidential basis. Consider
setting up a bonus plan for employees to remain. It can be an inexpensive way to alleviate
an ever-present problem.
4). Dress Up the Business: Small investments in revitalizing the appearance of the business can
pay big dividends. It will be counter-productive to replace or add expensive capital assets
as you probably won’t get your investment back on the sale. However, you can “dress up”
the business with a “paint and clean-up” campaign. The best way to handle the financial
impact of the clean-up campaign is to set an affordable budget. How much cash can you
devote to the project? Look at your list and prioritize based on the items which will provide
the highest visual benefit for the lower dollar cost.
5). Operate with Long-Term Goals: The tendency will be to sacrifice the future for the present.
To maximize pre-sale profits sellers may raise prices, curtail credit, eliminate advertising,
research and development and similar expense perceived to benefit only the buyer. Thinking
“short-term” can be counter-productive for three reasons. First, it may take you far longer to
sell the business than you imagined; the negative impact on the business may be felt sooner
than anticipated and finally, a knowledgeable buyer will look for the continuity of policy that
benefit the business after the sale.
Call us today for more information…716-668-6868