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Business Succession Planning
for Business Owners
How to Sell Your Business?
Step 1: Be prepared.
The more organized your information is, the easier the buyer’s
due diligence will be which, in turn, should heighten the buyer’s
comfort level. Remember: you don’t want to give your buyer
any excuse to renege or renegotiate the deal. Anticipate their information
needs and areas of discomfort and be forthright. Buyers get spooked
easily and usually respect when the seller comes clean where problems
are. Be judicious here – don’t undersell yourself. Just
be honest.
Step 2: Know
where to give ground - and where to hold it. Good deals go bad when
one side or the other come to issues they feel strongly about. Know
yourself well enough to know where you can give ground (when the
buyer pushes) and where you can’t. Don’t let the process
catch you by surprise. If it does, don’t be afraid to give
yourself some space and blame the delay on your attorney or your
CPA.
Step 3: Avoid
emotional attachment. This is a business deal. A sellers’
self-identity can get so wrapped up in the business that it’s
difficult to separate the two. This can cloud judgment. There should
be few automatic “no” or “yes” responses
to your buyer. Consider everything he or she throws at you with
due respect. Don’t waste time with tire kickers, though. They’re
usually easy to spot, especially with the assistance of your CPA
and attorney.
Step 4: Consider
a Letter of Intent with a deposit in escrow. This will usually flush
out the pretenders. If you’re feeling the upper hand, or have
proprietary information you are hesitant to share, try for a nonrefundable
deposit.
Step 5: Keep
everything confidential from all but the ones who need to know.
Staff continuity can be vital to a successful deal. Identify the
key employees and let them into the loop when the deal is fairly
certain to close (and not a moment before). This will help the key
employee feel their importance (usually appreciated) and will help
ensure a smooth transition…this will increase the likelihood
of the deal closing.2. Who should consider our business succession
planning services?
Everyone.
Business succession encompasses more than selling your business…it
includes planning the business’ transition for when you are
no longer around (voluntarily or otherwise). The Four D’s
[Death, disability, divorce, debt (bankruptcy)] all impact your
family, your customers, your vendors, your employees – all
your “stakeholders” – if you are suddenly unable
to function. Considering what will happen in those cases can significantly
preserve the wealth you’ve created in your business. For most
small business owners, their total net worthies heavily concentrated
in the business, so it makes sense to spend time to preserve as
much of this source of wealth as possible.
What should be the purpose of selling a
business?
Selling a business has to solve a problem: you
are ready to retire, need more cash, losing interest, etc. Point
is, planning to sell the business should start with a clear definition
of the problem that a business sale will effectively solve. So,
the question comes back: what is YOUR purpose for selling the business?
Knowing this is a critical factor to a successful sale.
When is the right time to sell a business?
You know your business better than anybody else
- perhaps you’ve been approached by a competitor or ally in
another market. Maybe you have a health or family issue that’s
driving the desire to sell.
In any case, there are several qualitative factors that can influence
your assessment of “the right time” to sell.
There are, however, some quantitative factors we can help with,
once you decide the time is right. Tax rates are likely to change,
long term capital gains and estate taxes are under the microscope,
interest rates are low, fuel costs are high, real estate markets
are down, credit is tight…these and other similar quantitative
influences all can effect the timing of your sale.
Why not just use a CPA or Business Broker
for everything?
CPAs and business brokers who understand business
succession are vital to the team…but they do not comprise
the entire team.
Under Florida’s Transaction Broker rules, a Business Broker
who does not represent only the buyer or only the seller are not
able to “advocate” (fight for) your position. They “facilitate
the transaction” by acting as a go-between. They also usually
have some training in tax and business succession matters, but are
professionals whose skills are best used to match appropriate buyers
and sellers. |
