The permanent uncertainty of selling a business
The only certainty in business as we head into April 2018 is uncertainty of selling a business. This sums things up from my perspective as we navigate several critical events that are now evolving, and which may take a few months to play out and become clearer.
For example, the US is now navigating a trade war with China over tariffs while China holds about $1.18 trillion of the approximately $6.3 trillion in US public debt. In addition, we have political uncertainty with North Korea and their nuclear ambitions. This has now been complicated by the firing of National Security Advisor HR McMaster and the nomination for his replacement, Mr. John Bolton. Mr. Bolton, based on his previous comments, is totally opposed to the Iran Nuclear Agreement signed in 2013. Other political challenges include Stormy Daniels and Karen McDougal and their sexual encounters with the president. Last, but not least and whatever it means, there is the ongoing Russia investigation by Special Counsel Mueller. Now throw in the Cambridge Analytica disaster with Facebook, which I think, is only just getting started before it truly plays out.
The Definition: Uncertainty of Selling a Business
Owning and operating a business comes with uncertainty. If there was no uncertainty everyone would do it. If there was no uncertainty, there would be no need for a place called a Stock Exchange to buy and sell the shares we own in a public corporation that can change value in milliseconds.
The reason for highlighting all this uncertainty is that if you own and operate a business and want to sell or get out and do it on your terms, the process comes with much uncertainty, but the time may now be right. If the thought is on your mind to sell your business as you go to work each day, the time may be right to put a plan together and see if the market will bring you a buyer for your business.
Accurate financial statement – the silent deal killer
As I navigate the many variables of selling a business, a theme that pops up too often, not a lot but too often, are the quality of the set of financial statements the business owner presents to business buyers.
Probably the most important item in any transaction to sell or buy a business are the quality of the financial statements.
It’s understood that sellers wish to minimize the amount of tax they have to pay. It’s also understood there are many legal ways to reduce, delay or minimize taxes.
It goes without saying that it won’t be possible to sell a business if the financial statements are not accurate and the accuracy needs to flow through all the supporting documents that are part of the financial statements. This includes journals
and ledgers that record sales to software such as QuickBooks or Sage to payroll to inventory counts to credit card statements to bank statements to Profit and Loss Statements and ultimately the annual Tax Return.
The good news when you start the process to sell your business is that you get to make that decision. Once you make that decision, there are many other decisions to be made but they effect more than the seller. Decisions impact the buyer, the lender; if a third-party loan is involved to provide some finance, a landlord if the business leases space from which to operate the business, employees, customers, suppliers and more.
If you are thinking of selling your business and want an overview, click this link to see the Many Steps to Sell A Business.
Don’t tell your employees the business is for sale
If you would like to remove another factor of uncertainty if you want to sell your business, then please don’t tell your employees.
By definition, employees work in the business as it provides them with a job. If they know or find out the business is for sale and that job may go away, they will naturally look for another job as they want the security of employment and a pay check. Recently a business owner thought he was doing the right thing by telling his employee the business was on the market. Two weeks later the employee had a new job and three weeks later that offer from the buyer to buy his business was withdrawn as the buyer wanted that employee to continue.
If you have questions about selling your business and you’d like to get an answer, give me a call on (916) 570-2674 or use the Contact in the top right corner of this website to send me a question and I’ll get back to you with an answer.