I believe that the most qualified person to help sell a business is the owner. Based on that belief, you will play an important part in completing the sale of your business. Locating qualified prospective Buyers and maintaining confidentiality during the initial planning stages is critical. If it becomes known that a company is about to go up for sale, their banker may start to pressure them, employees  may defect, and the competition may tell the company’s customers they are going out of business.

I know the importance of confidentiality, so all communication and information is carefully guarded. Prior to receiving any information about your business, all buyers must acknowledge, by signature, their agreement to keep all information in strict confidence. Nearly four million small businesses will change hands this year. Following are some of the most often asked questions from business owners contemplating selling their business.

Answer ---  Reasons for selling a business  will very from one extreme to another. Most buyers will be interested  to know  what  the  business owner is selling. There are several good reasons for selling a successful or unsuccessful business. A business owner may find a more attractive venture, He or she may be suffering from  burn-out.  Perhaps it is time to retire. There may by health problems. Whatever the reason, be prepared with a good answer for the prospective buyer.

Answer --- Only one person knows everything about you business--- that is your, the owner.
You have all the knowledge about your business that a buyer requires. You know the strengths and weaknesses or your operation.  You know you competition. With the right preparation from you and the counsel of your attorney  and  CPA, you will  be a vital part of the sale of you business.

Answer ----  A diligent  buyer will seek to confirm every phase of your business through thorough examination. This may include a review of you marketing programs, product and service mix, management structure, customer base and more. They will review you financial statements, tax returns and payroll records. They will review the assets of your business including equipment, vehicles, inventories and lease-hold improvements. They will want to know about any pending litigation, employee contracts and agreements licenses, permits and franchise agreements. Try to have all of this information available…your organization skills will pay off now.

Question 4 --- What can I do to help during the selling process?

Answer ---  The time required to sell a business, from the decision to sell until the completion of the  transaction, may be months. The first seep is to establish a fair and reasonable price for your business.  Next, prepare all the information and documents mentioned above. Be prepared to work with prospective buyers that we bring to you. Again, you are the most important like to selling your business. Remember, confidentiality is a must and is something within your control

Answer --- Determining the price of your business is a very important step in the marketing process. Don’t spend thousand of dollars fixing up the business and then fail to prepare a financial picture. Most small business show losses on their financial statements and tax returns, but in many cases these businesses sell for more than their books show they are worth. Be prepared to show your financial picture in its best light. This is done by a process of recasting. Recasting exposes the inconsistency by restating the business’ financial position through various techniques. This may include removing the owner’s compensation, perks, personal accounts paid by the company, vehicles and travel expenses. Non-recurring expenses and excessive interest payments can be removed. A good evaluation will enable you to establish a true value for your business rationally, objectively, and best of all, defensibly.

Potential buyers vary from private entrepreneurs to large, publicly owned companies. The ideal candidate will depend on the characteristics of your company. Different types of buyers will include individuals that want to pursue the American Dream of owning their own business. There may be families, corporations. partnerships, foreign investors or silent investors. Buyers are motivated to purchase for two major reasons --- synergistic or economic.  A synergistically motivated buyer is one who believes that the sum value of combined firms is greater than the sum of the firms separately. Through an acquisition or merger, this buyer can greatly improve their position. The economically motivated buyer, on the other hand, does not expect to realize and advantage from a unique fit between an existing business and the acquired firm. They evaluate a transaction strictly on the economic benefit from owning the firm.

Financial structuring provides the means of balancing the risk of the transaction between the buyer and seller. In general, the greater the amount of risk you are willing to assume, the greater the price the buyer witll be willing to pay. In an all cash deal, the buyer assumes all the risk while the seller assumes none. At the other extreme, when a buyer puts no cash down and you accept the full payment in the form of monthly payments, the seller assumes all the risk and the buyer none. Other methods of payment include stock, secured notes, unsecured notes and earn outs. Each of these alternatives will have varying tax implications, which should be carefully reviewed with your financial advisor.