Get the Best Price for Your Business



	7 Tips for Sellers

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How to Get the Best Price for Your Business

1. Plan the sale of your business before actually putting your company on the market. Fix anything that's broken, including equipment, financial statements, procedures -- even employees. When the business actually goes on the market, every month should be a banner month. A business that is perceived as growing and thriving will fetch a premium price; one seen as in decline will be harder to sell and will bring a lower price.

2. Shift your focus from saving taxes to building profits. While entrepreneurs typically allocate revenues to a wide range of expenses in order to lower taxes, reducing profitability will also reduce the price a buyer will pay for your business.

"Skimming" is a touchy topic, but if you've been skimming money from the business, you have three options. 1) You can continue and probably get less for the business; buyers will not pay for cash flow you can't prove. 2) You can stop skimming and put all cash flow in the bank during the term of the listing; this will go a long way toward getting your full asking price. 3) The last option is to continue skimming, but keep records which will prove the actual receipts. We can not legally represent this kind of revenue, so itąs up to you to prove it exists.

3. Put your books and financial records in order, and create an operations system and structure that can be passed on to a new owner. If your business is set up so you are the only one who can run it, a buyer will consider it less valuable. Even if the buyer plans to bring in a new team and reorganize, having a clean starting point is helpful.

In conjunction with this, make sure all sales tax, income tax, payroll tax, and property tax returns are filed and paid. If real estate is included, make sure all real estate taxes are paid and there are no liens against the property. A title search is always done before closing and you need to disclose everything up front to the buyer (even if you can't pay your obligations without first selling the business). You will need to pay certain obligations at closing for some buyers to go through with the purchase. Do not lie about anything or you will kill the deal!

4. Be willing to take 25%~50% of the purchase price as a down payment. The more cash you want, the less likely your business will sell quickly, or at all. You can normally get more money for your business if your terms are attractive. Remember that the new owner must use the cash flow to pay debt service to you. Expect to take back a note for the balance of the purchase price. The interest rate will probably be around 8%~10% and the term could be from 3 years to 10 years, depending on the purchase price. You can request additional collateral for the note depending on circumstances.

5. Tell your "key employees" that you are planning to sell the business. Let them know you will serve as their advocate with the new owner, and help them understand their importance to the business. Make them feel good about their contribution to profits and service. Explain your reason for selling, and reassure them with a written promise of a cash bonus they will receive when the business sells. This is your way of thanking them for maintaining confidentiality and loyalty during the term of the listing.

6. Hire a professional intermediary who has the necessary negotiating and business skills to present your business in the best light. Ask for written testimonials from people who have had their businesses sold by the intermediary. Find out what kind of efforts the broker will make to market your business and sell it under the best possible terms, not simply list the business and forget about it.

As noted in Tip #1, you need to concentrate on running the business efficiently and profitably while it is on the market. Let the intermediary work at selling the business for you. Even if you have reached the "burnout" stage, keep going. You don't want a prospective buyer to suspect you have an urgency to sell.

7. Talk with your attorney, accountant and landlord before putting your company up for sale. The business broker is the quarterback, but all team members must work together to help you sell your business. Give your business broker their names and numbers and arrange for the broker to meet each person face-to-face within the first 30 days of the listing. It is important to understand each person's perspective to insure no one will "kill the deal" after a contract is signed. Allow the business intermediary to do his/her job. If you don't believe they will do a good job, don't hire them. If you do believe they are professional and competent, don't try to second guess them.