Martha Spelman Selling Your Business illustrated with Baton Passing

Some of us start a business knowing we eventually want to sell the business. And some of us just start a business. But down the line…a few or many years later…we think about “getting out,” retiring or moving on to something new.

There are different ways to “sell” your business — it could be a matter of passing it along to the next generation, selling it to one or more members of your staff or going outside the company for a merger with or acquisition by another company or outside investor.

While it may take a few months or a few years to sell your business, planning for that eventuality should start now. No matter who your buyer is, as the seller you need to get your ducks in a row.

Here are the important components to consider if you want to sell your business:

  • Have a strong brand – a clearly-defined profile of your audience, the products or services they buy, and the products or services that you offer. Is your company considered an “expert” in the field? If this is a bit “hazy,” it may be time to narrow the focus of what your company offers (think “niche”) — and have an eye to not only what your customers are buying but what someone who is buying your business might be looking for. Some companies buy other businesses to expand what they offer, some buy to eliminate competition or add customers and others are in need of additional trained staff. Exploring “why” someone might buy your business is as important as “why” you might be selling. When you’re ready to sell your business, you now have a new audience…think of them as customers who are buying the business you are selling.
  • Leadership and staff with experience and expertise — who can lead and run the company and be part of the sales package.
  • Processes are in place and are well-documented – from operations to human resources to accounting to project management; a veritable “users manual” for your company.
  • Accounting – you can show clean financials: all records are up-to-date and accurate, accounts receivable and payable are current, taxes are paid, personal expenses are separate from business expenses; it would be prudent to have the financial component vetted by an outside firm.
  • Legal – if possible, any outstanding legal issues should be be resolved; remaining issues will require disclosure.
  • A sustainable model for how the company can succeed, years into the future. This includes a loyal client base, a book of business (as well as evidence of a pipeline of potential sales), products or services that will be in demand and evidence of cash flow.
  • A proven marketing strategy is in place and executed on an ongoing basis.
  • Compliance – all software utilized by your company should be licensed and up-to-date; required certifications, accreditations, etc. are current.
  • Other Assets: If your company owns or leases real estate, machinery or other furnishings that will be part of the transaction, confirm that any leases are in order (you may want to negotiate extensions if little time is remaining) or that title is clearly held to facilitate sale or transfer of the property.
  • No surprises! Transparency is imperative – all issues from legal, financial, employment, inventory or otherwise — must be disclosed.
  • Your exit plan — are you willing to keep your “hand in the business” as an advisor or consultant? Would you consider a workout of 1,3 or 5 years? Will you finance the purchase or accept cash, stock or a combination as payment?
  • Before undertaking a sale, it’s in everyone’s best interest to have the business valued by a Business Valuation Expert.

On a side note, I think many business owners don’t want to sell their business because it’s been their life…they are very tied to it and once they sell, they’re not sure what they’ll do. Prepare yourself for this eventuality as well. Setting up yourself as a consultant, starting a new business or heading in to full-time retirement…all require preparation!