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.

Do you want to sell your business and sell t quickly? According to the California Association of Business Brokers it is taking about 8 months to sell a business. That is the good news. The bad news is that only about 25% of businesses actually sell. If you want to sell your business and do it quickly consider the following suggestions.

1. Have a reasonable listing price.
2. Be prepared to negotiate.
3. Have a folder of information readily available for a qualified buyer.
4. Run the business as usual.
5. Make sure the business presents well; give it a “spit and polish.”
6. Get the business financial statements such as Profit and Loss up to date and keep them up-to-date.
7. Put together a current list of Fixtures, Furniture, and Equipment (FF&E).
8. Count all inventory so you know the value before you list the business for sale. This helps the buyer understand the final purchase price and reduces one of the many areas of negotiating a deal.

Motivation to sell a business

If your motivation is to sell your business quickly, be careful how you handle each buyer inquiry. If you disclose too much information too quickly it may result in a lower offer from the buyer. Additionally, the buyer may sense your urgency, also contributing to a lower offer or in some cases, frightening the buyer away as they may have a concern you are trying to hide something.

According to the California Association of Business Brokers, it takes about 7 1/2 months to sell a business; if it sells. Once you receive a written offer from the buyer and start the negotiation process, it will take anywhere from 6 to 8 weeks to close escrow if the sale includes inventory. It may take longer if a special license is necessary such as selling alcohol, selling firearms, a contractor’s license or some other specialty.

Selling a business comes with complexities

There are many complexities to sell a business. You have to deal with landlords, keep things confidential from customers and suppliers, franchisors, lenders, creditors, family, friends, attorneys, accountants and more. Using the services of a qualified business broker can protect you and your business and achieve your goal of successfully selling your business in the shortest time possible for the highest purchase price.

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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Successfully sell your business

Why would you bother when selling your business to include a sales and marketing plan?  After all, the sales and marketing plan is a document that most business owners don’t have time to get around to put together.  I’m not sure why that is as it’s more important than the business plan and indeed complement it but more importantly, when the business owner wants to sell their business it can be the difference in the business selling or closing its doors.

Why is it more important than the business plan?  The business plan outlines the vision, strategic direction and business and financial goals of the business.  The sales and marketing plan breaks down the business plan to show how you are going to get there and the tactics to be used to attract the customers it needs.  Or more importantly, the sales and marketing plan is about growing the business and how to maximize the use of precious and limited resources including money, knowledge, expertise and most important of all; time.
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Hopefully you will make a New Year’s resolution which includes building a business plan and in it, your personal and business goals.  You will also do a budget to make sure you can afford to execute what is in your plans.  Hopefully you are rested and as they say, “all dressed up and ready to go.”  You are also saying “Bring it on.”  My question is therefore, you know WHAT you want to do but HOW are you going to do it?

Chances are you have a list of projects and tasks you want and need to do.  It probably does not include answering phones, sending and receiving emails, reading articles and newsletters, attending conferences, staying on top of compliance items that affect your industry but numerous day to day activities that lead most entrepreneurs at the end of the day to say “Where did the day go?”  That’s the point of a Productivity plan.

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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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Not everyone will agree but I am sure it’s closer to the truth than one might think: buying or selling a business is unlike anything else of value. To support my argument there are a number of reasons. Let’s look at some of them.

The price of a business is determined by a valuation. The rules of a valuation come from the law and then legal cases as well as the Internal Revenue Code and custom. The price for most other items of value are determined by 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 you can think of). That is, there is no legal interference with the value of any these items except a business.
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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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The law requires us to put on a seat belt when we get into our car and drive. The law also requires us to have car insurance in case we have an accident. Perhaps we do not like the government telling us what we can and cannot do but one thing the government does not tell us to do is put together a sound personal financial plan.

For those of us closer to retirement than the early stages of our career, if we do not have a sound personal financial plan then our chances of enjoying our retirement are becoming less by the day; or as now seems more and more likely, the date we start our retirement will be pushed out further.
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There is a US Court of Appeals judge by the name of Judge Learned Hand and he lived from 1872 to 1961 or until he was almost 90 years old. Originally from upstate New York, Hand graduated from Harvard Law School and became a lawyer. At 37 years of age he became a judge appointed to the Federal District of Manhattan and he became well known and respected for the quality of his judgments.

What caught my attention was one of the best quotes I’ve read regarding the paying of taxes. His quote is “…over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do it right, for nobody owes any public duty to pay more than the law demands.”
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If you embrace the saying “Two things in life are certain: death and taxes” and you own a business, it is a good idea to put a plan in place to protect the business. You protect the business not only when you own and operate it but just as importantly when you decide it is either time to sell so you get the best and highest price possible or if you decide to transfer it to your children or employees, it is in the best condition possible.

If the plan is to transition the business to a new owner and do it over a one to three year time period, the best way to do everything correctly is by using an Exit Plan. So what’s an Exit Plan?
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So many small business owners are buried in the minutiae of running their business they forget to step back, question where they have come from and why and then make sure they know where they are going. I am not talking about the direction of their business; I am talking about one of the most important assets of the business and that is, themselves. If something serious was to happen to them, what would that mean for the business? Can it continue? What steps are in place to replace themselves or any other key employees? If the business supports their immediate family what would happen to them and how would they survive? Perhaps the joy of running the business is declining and so it’s time to think about handing the business off to some fresh blood or find a new owner?

To help formulate an approach there are two key components to use. The first is an Estate Plan which can be a standalone process, or an Exit Plan which can include as one of its components an Estate Plan.
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One of the questions I am asked from entrepreneurs going in to business for the first time is what legal entity do I think they should use. My suggestion is that they simply open their business as a sole proprietor and once the business becomes established, then look to research and understand the different options and their costs so they create the right legal entity.

For some situations there is no choice but to move to a specific legal entity. For example, if two friends wish to create a business and they want it to be a partnership, then a legal entity that serves that need is required. In other cases, some professions require a legal entity, for example, an accountant, attorney and a medical practitioner. However, for a retailer, distributor, restaurateur or manufacturer it probably does not have that urgency and can wait. Most small business owners believe they need the legal protection of a separate legal entity to protect their personal assets but you can solve this problem with a good business insurance policy; which you will need for your business anyway.
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