Are you ready to sell your business
Are you ready to sell your business? If so, what is the cost of not being ready?
At a seminar I recently heard the speaker ask this simple question – what is the cost of not being ready? The speaker quickly gave an answer and moved on to the rest of his presentation. Unfortunately for the speaker or perhaps, more unfortunately for me, I missed the next few minutes or so of the presentation as I kept throwing around his question in my head – what is the cost of not being ready?
This is such a great question that everyone needs to ask if they plan to make any major change in their life. Change is a constant whether we like it or not. It is here and it is all about us. This is no more evident than with the huge growth in social media and how it can create a ‘buzz’ in no time at all. Until recently most of the world had never heard of Joseph Kony and his actions in Uganda. Now the video and talking heads are everywhere; all from a single video that exploded with 58 million global viewers and counting.
If you think it is time to sell your business then there could be no more apt question than – What is the cost of not being ready? I constantly see business owners trying to sell their business and have simply not done the required work to get the business ready for sale. The main reason is that most business owners are far too close to their business and do not understand the extent and depth of the questions to expect from a buyer. Additionally, they do not understand the need to only disclose certain information at certain points in the transaction. Consider the following as only a few of the main items to consider. Each business is unique and has its own personality so do not expect one size fits all approach.
Are you ready to sell your business?
Probably the most important item to review when selling a business is the lease. If the lease has expired or is about to expire, then it needs to be clear to the buyer what they are buying or they can simply go straight to the landlord and negotiate the rent. Additionally, if the landlord is unhappy about your relationship with them they may have no interest in working with you to allow you to sell your business. If you own both the business and the real estate and are willing to sell the business to become a landlord, the terms and conditions of a lease will be important to the buyer.
Equally, the skills and experience of the buyer will be important to you. Make sure you are ready with the questions you want to ask a buyer and know what sort of buyer you want. I am currently working with a medical practice owner that wants to sell the business to one of his employees as he’s burned out and looking forward to retirement. In his eagerness to sell to the employee he is thinking more like a business seller than a landlord. In this particular case, I am not sure the buyer is ready to buy but because the seller is ready to retire he is not seeing some potential problems.
In addition to the lease, another critical area for a seller to consider is whether or not they are willing to carry some of the finance. Whatever your preference, make sure you determine your choice and are ready to go. If you are prepared to offer seller finance, what information do you want from the buyer to satisfy you they are a good tenant and therefore a good risk?
Similarly, if you do not want to carry any seller finance, understand the buyer will need your tax returns, profit and loss statements and balance sheets to go to a third party lender and get a loan. Be careful with how quickly and easily you disclose these very personal documents. Make sure you are ready to ask the buyer his financial ability to qualify for a loan. There is no point in you sharing your personal documents if the buyer has no ability to get a loan approved.
So what is the cost of not being ready if you wish to sell a business or buy a business?
The costs could be great. Not only could the attempt to sell or buy fail, but it may bring extensive damage to the business. In another transaction where I helped a seller, the landlord had recently lost her husband. The husband had been the business decision maker but now he was no longer around, it was a much slower process to get answers to questions and as a result, a motivated buyer decided to move on as they could not wait any longer. In this case, the sale of the business was lost and after the buyer moved on, the health of a key employee was damaged and it meant the success of the business was hurt and forcing a substantial reduction in the selling price of the business.
Would you like to know the value of your business? If you would like to know the value of your business or would simply like more information, this link will allow you to get a free sample of a Brokers Opinion of Value – Sample business valuation