Here are some tips to successfully sell your business.  Bear in mind that to sell your business successfully requires a lot of preparation, attention to detail and organization.  Most sellers badly underestimate both what they need to do and what to do if a qualified buyer comes along.

A good rule of thumb is that it takes about ten buyer inquiries to reach a potential buyer who has the qualification to buy the business.  There is not a shortage of buyers; there is a shortage of buyers who have the right industry and management experience, a good down payment and credit score and the most important ingredient of all, the motivation to move through the process to buy a business.  So if you find the right buyer, you need to have your “A” game ready so your business sells in the shortest time possible.

Here are 5 tips to help you prepare and be ready to sell your business.

1.  Assuming you know what the buyer wants

Buying a business is a unique experience; every transaction is unique.  If you meet a buyer with the right qualifications and assume you understand their needs, wants and motivations it is a bad practice as a smart buyer will not reveal their true motivations.

2.     Failing to understand the buyer’s objectives and needs

There is a big difference between assuming you know what the buyer wants and clearly understanding what the buyer wants to know from you.  The buyer has questions and needs and it will be their final decision as to whether or not this is the right business for them to buy.  If you can meet the criteria the buyer gives you…you are on your way even though the criteria may not ultimately be what the buyer says to you.  So listen and understand what the buyer wants to know and decide if it is the right time in the transaction to share it with them.

3.     Improper pre-sale planning and a lack of organization

There are so many steps to successfully sell a business.  Being organized and having all the right processes in place is a starting point to try and be successful.  This includes the legal forms and processes you want a buyer to sign such as a confidentiality agreement, buyer’s financial statement and buyer disclosure.

4.     Answering the question before the buyer asks

Be careful to understand the question and then provide the right answer.  You may be answering a different question than the buyer is asking…and that can be bad or very bad.  When you sell a business there can be great value in listening and answering as clearly and honestly as possible all the questions.  Too much information provides more questions, not enough information suggests something is being hidden.

5.     Allow the buyer to feel a sense of control

The standard practice is for all parties to try to control the process.  After all, if a deal does not eventuate each party feels they lost something even if it’s only their time.  Most deals collapse and the business does not sell because one party doesn’t understand what or why a question or process needs to happen at different points in the transaction.  Trust is one of the hardest components to create.

Selling a business requires a lot of patience, making sure it’s clear what you are selling, organization so you can respond to questions and requests for information while at the same time being alert to only answer questions at the appropriate time.

If you’d like more information on how to sell your business, you are welcome to sign up for my free monthly newsletter by clicking the following link Free monthly newsletter.  When you sign up you also get access to over 25 free documents to use when selling your business.

Only negotiate when selling or buying a business.  This may seem an unusual heading to an article but it now keeps happening too many times and I feel compelled to write about it.

There is no question that selling a business is difficult as there are so many items to consider.  Equally, buying a business is extremely difficult not the least because the buyer may not know the seller but more importantly to the buyer, because they are yet to fully understand how the business works and what has made it successful.

When you put these basic unknowns together and add the imprecise art of valuing a business, both the seller and the buyer understand there will be a negotiation on the final purchase price of the business.  What is intriguing from my perspective is that sellers and buyers can spend a lot of time and negotiating energy to purely focus on the purchase price, which is important as the seller does not want to take less than they think the business is worth and the buyer does not want to pay any more.
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Successfully sell your business

Have you thought of using a transition plan when selling your business?  The process to sell a business is not quick and easy.  At the moment it is taking about 8 months to sell a business, if it sells.  This means the business is available for about 6 months.  The buyer and seller then complete negotiations on the purchase price including the terms of the deal.  The next main step is to start the due diligence and if both buyer and seller are still in agreement, escrow opens and then hopefully about 3 to 4 weeks later, escrow closes and the business moves from the seller to the buyer.

Even if the business closes escrow, almost without exception the buyer wants the seller to continue in an active role in the business in some capacity for a period of time.  The buyer wants time to meet and get to know the employees, set up arrangements with suppliers, put basic items in place like bank accounts, and a myriad of other items.  At the end of the day, however, it all needs to make sense for both the seller and the buyer and the best way to do that is to build a transition plan.
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To sell a business with an exit plan is simply good business.  A business is a ball of energy, never sitting still but reacting and moving in different directions as the economy changes, new tools and innovations come to market, the stress and strain from competition and the ever changing demands of customers.  The challenge to succeed, feed their family, help and create happy customers and other individual motivations are what gets a business owner out of bed every morning.  It also includes the chance to do something different, learn something new, to see the rewards of hard work, to plant new ideas and watch them grow or to help someone do something they thought they may not be able to do.

If the business owner loses the hunger to learn, be the vision and leader of the business, it’s time for a change.  Because a business is so dynamic, it requires leadership.  If this doesn’t happen it will shrivel and die.  Capital, time and energy must keep moving otherwise it will slowly die and fade away.
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The life blood of what we do as human beings and the glue that keeps us all together as a society whether at a local, regional, national or indeed international level is the ability to communicate with one another.  Many times that communication breaks down and many times this leads to negative consequences.  All entrepreneurs are familiar with a Business Plan and a Sales and Marketing Plan but not everyone has heard of a Communication plan.  So what is a Communication plan?

A Communication plan is an attempt to standardize the message that goes out from the business to its customers.  It complements and dovetails with a Business Plan and Sales and Marketing Plan.  In some instances there can be an overlap but essentially it includes all written, spoken and electronic communications.
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Buying or selling a business is a complex matter.  There is no question about it.  The complexities start from the moment a buyer and seller start interacting.  These include, for example, the buyer not having any history or knowledge about the operation of the business and so have to rely entirely on the representations of the seller.  Conversely, the seller lives and breathes the business, knows its ups and downs as well as its strengths and weaknesses.  My Golden Rule when assisting with a business transaction is for each party to put their feet in the shoes of the other party.  In other words, the seller should see things from the buyer’s perspective and the buyer should see things from the seller’s perspective.
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Everyone is familiar with the Christmas song, The 12 Days of Christmas.  Without going into every verse of the song, the carol works forward with the first day of Christmas being a partridge in a pear tree, the second day of Christmas two turtle doves and so on.  The song is full of optimism and hope that the giver and receivers of the gifts will be thankful for life, the opportunity to share and hope for the future.

From researching the origins of the song, I came across something interesting.   One of the articles I read suggests the 12 days of Christmas is not about the 12 days prior to Christmas but in fact, the 12 days from Christmas until the beginning of Epiphany which begins on January 06.  When I thought further about this, it naturally combined with another favorite thing we do during the Holiday Season and that is to make New Year’s Resolutions.
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Intellectual Property can sneak up on some businesses as it may start from a “good idea” that helps the business survive then gradually become an integral part of the business and later become a critical part of its existence. Interestingly, Intellectual Property also comes in many shapes and sizes. A business owner therefore needs to recognize these different shapes and sizes so if they choose to sell their business, they have the right legal protection in place that protects an intellectual property asset and therefore rightly earns the owner the amount it is worth.

So what are the different types of intellectual property? The IRS recognizes the following when they are part of a business transaction.
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Whether we are a business or an individual we need to understand ‘our tax position.’ Perhaps you are a business owner who is thinking about selling your business?  You have been doing this for many years and you have made the decision to sell and move to something new.  You are probably burned out, have a concern about your health and decided to move to a bigger and better idea.  Congratulations!

So step one is the decision to sell.

What should step two be?
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When talking about good strategies to limit the amount of tax the owners or the business has to pay, there are three issues to consider.

The first issue, which tends to be the most obvious but also the most difficult, is to encourage business owners to take advantage of solid tax planning.  The demands of owning and operating a business especially during a difficult economy does not seem to provide a good Return On Investment for the time or money it may cost to find out the best direction to go.  By avoiding good tax planning can in turn mean the business pays more than its fair share of tax at both the business and personal level and that does not make a lot of sense.
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The obvious question to ask when you plan to sell your business is “How much of the final purchase will I get to keep?”  That seems a very fair and reasonable question.

Unfortunately, it is not a quick and simple answer.  The buyer of your business will make a final decision to buy the business based on the maximum operational cash flow they can get from the deal.  The seller has a different agenda which is to maximize the amount of the purchase they get to keep after paying all taxes.
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How do I minimize the tax I pay when I sell my business? You have made the decision to sell your business.  You have decided what you will move to once the business is sold.  You have a valuation so you know what your business is worth.  You’ve looked at the business with fresh eyes and have it looking good so when a buyer comes along they will like what they see.  As they say in the Classics, you are all dressed up and ready to go or as I like to call it, you are seller strong.  That is, you know where you are going and how you want to get there.

However, there is a final piece you need to know so you can maximize the value from selling your business and this is to understand how much tax you will have to pay.  This may seem like a waste of time and money but in fact it is the opposite; and here’s why.
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If you are thinking of selling your small business, one of your first questions to answer is more than likely; where do I start?

One of your first starting points is to be clear exactly what you are selling.  This may seem obvious but many sellers think they will deal with it when they get an offer.  So let’s break this down and look a little more closely at it.

In simple terms, the two most important things to a buyer when looking to buy a business are current cash flow and potential.  From the buyer’s perspective, the cash flow is the fuel that feeds the business to pay the suppliers, employees, landlord, tax man, lenders and to keep the business going.  In addition, they need cash flow to feed their family, pay the mortgage, pay any loans and have something left over after all their work and capital investment in the business with a little in reserve in case something unexpected happens.
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Not everyone will agree but I am sure it’s close to the truth that buying or selling a business is unlike anything else.  Here are four reasons.

First, the price to list a business for sale generally comes from a valuation.  The rules of a valuation come from the law and legal cases as well as the Internal Revenue Code and custom.  The price for most other items of value come from market comparables (for example, when valuing a house), looking up a book or some online site such as Kelly Blue Book (for cars) or results from eBay or some other online service (for any item.)  That is, there is no legal interference with the value of any of these items except a business.
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Over the years, the sale of many businesses includes a component of seller finance.  Since August 2008, a component of seller finance for privately held companies has become much more the norm as banks and third party lenders have been reluctant to lend.  It’s become important not only because the banks have reduced their amount of lending but also because the banks are now reluctant to loan as much of the purchase price.  For example, in previous years, if the buyer brought a down payment of 20 per cent the bank was willing to lend the remaining 80 per cent.

So the good old days are now behind us with the banks now preferring the buyer to bring a down payment of 20 per cent, the seller to carry a note of 20 per cent and the banks will then fund 60 per cent as long as the seller moves into second position.
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