Ground rules for successfully sell your business

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Sooner or later you are going to exit your business. The question isn't whether or not you will be ready. The sixty four thousand dollar question is whether or not your business will be ready.

It is estimated that seven out of ten privately held businesses have no succession plan to transfer the business to the next generation of owners. What does that mean to you? It means that if you do not currently have a plan in place to transfer your business to family members, existing partners, management or employees, someday you will think about selling your business.

That day might come sooner than you anticipate. Don't make the mistake of thinking that just because you are not currently ready to retire that you have plenty of time to prepare your business for sale.

As a business broker, I have been involved in a number of transactions (and potential transactions) where the business owner wanted to sell, or in some instances, was forced to exit the business earlier than expected. In fact, retirement is NOT the number one reason why businesses sell.

Here is a list of the most common reasons why owners sell (or otherwise discontinue) their businesses:

Burn-out (the number one reason for selling)

Health issues

Personal diversification

Retirement/semi-retirement

Death

Divorce/partner disputes

Business growing too fast

Second generation not up to the task

Loss of market share

TAKE GOOD CARE

The sad truth is that many business owners do not take good care of their most valuable asset: the business. They don't groom someone to continue the business in their absence, and do not keep the business in salable shape during the time they operate the business.

Business owners tend to get too bogged down in the day to day business operations to worry about--or plan for an event that they perceive won't occur until sometime in the distant future; selling the business.

Unfortunately, fate sometimes dictates circumstances beyond your control, and tough decisions must be made. If your business isn't ready to sell when the time comes, what are your alternatives?

1. Liquidation of business assets--may be a solution, but one that usually returns very little money to the business owner. If the business had been an operating business, the underlying assets (except for real estate) may be outdated and of little use to anyone. At auction, the assets will bring only what the attending bidders are willing to pay. In some instances, underlying assets are sold to liquidators (or scrap) for only pennies on the dollar. Liquidation of a going business often occurs where the owners have become ill or disabled, or need to retire and have not planned adequately for their exit from the business.

2. Closing the business--is even less attractive than liquidation. That is because many who find themselves in this situation have a tendency to "put off" liquidating the underlying assets in hope that maybe someone will come along to buy this business. This almost never happens.

BUILD WEALTH NOW BY PLANNING FOR THE SALE OF YOUR BUSINESS

Okay, so you think you have enough to do without throwing more onto the pile. Am I right? That is why I have written this article for you. It provides a "down and dirty" overview of things that you ought to begin thinking about and planning for right now. Doing so will provide you with an additional safety net that will help safeguard your valuable business asset.

Here are just a few of the benefits of planning now:

A planned sale allows for your goals and objectives on your timetable

You may begin to identify potential buyers

You may be able to create an attractive acquisition candidate

You can begin to understand why a buyer may want to buy

You might learn why buyers would not want to buy--and be able to fix the problems

You may begin to realize the worth of your business now, and learn how to increase the value as part of your retirement planning

BUSINESS VALUE HOUSEKEEPING CHECKLIST

Record All Sales

Business owners often invent remarkable ways to beat the tax collector. But the taxman can be a business owner's best friend when it comes to selling one's business. Income taxes are a great investment in the years immediately preceding an anticipated sale of the business.

Paying income tax proves to the buyer AND the banker that your business operations have been profitable.

Nobody wants to pay more income tax. But consider this example: Ronald Bunk systematically underreported business income by an average of $20,000 per year. Assuming a combined tax rate of 40%, Mr. Bunk saved $8,000 in taxes per year. But, the underreported income also reduced the company's earnings base by $20,000 per year. If, for example, the business could be sold for a multiple of 5x the company's reported earning base---the company would sell for $100,000 less ($20,000 average earning base not reported times the price multiple of 5) than it is really worth!

Without considering the time value of money, it would take in excess of twelve years of (illegal) tax savings to make up for the loss of $100,000 in business value. The lesson: In trying to screw the government, business owners often find themselves on the short end of the stick; often in more ways than one.

Eliminate co-mingling of business and non business assets

A common practice among closely held companies is to co-mingle non business assets and expenses with business assets and expenses. I have seen businesses owning motor coaches, boats and airplanes; all reported as business assets. The costs of maintaining and operating the assets were expensed as regular business operating expenses.

It is true that those businesses (not audited by the IRS) are saving a certain amount of income tax, and providing an extra "fringe" benefit for the owners of the company.

Wise business owners should endeavor to separate non business assets from the business in the three to five years before a planned sale of the company. Doing so will make it much easier to accurately measure and reflect the true earning power of the business, as it will be unfettered by the capital investment in non business assets and the associated costs.

Buyers of your business are generally purchasing future income and benefit streams that will be produced by your business. The leaner and more productive your business is--the more it is worth. It is never too early to begin segregating non business assets from your business, as it may take some planning and time.

Do your own due diligence

Some executives of both public and private firms get a physical check-up once a year. Many of these same executives think nothing of having their personal investments reviewed at least once a year, if not more often. Yet, these same prudent executives never consider giving their company an annual physical, unless they are required to by company rules, regulations or some other necessary reason.

Anyone interested in purchasing your business will perform "due diligence" procedures on your business before closing on the purchase. All too often, sellers are surprised at the skeletons purchasers can find in the closet. These skeletons can reduce the value of your company, and in some cases, kill any chance at closing a sale. What skeletons are your company's closets?

Why not give your business a periodic physical? In essence, I am suggesting you would do well to treat your business as if someone else owned it--and you were the potential purchaser. What problems would you discover that could cause you and your advisors to reduce or withdraw your offer?

Spending the time and money to discover and fix your company's problems now will pay huge dividends in the form of increased company value--which is exactly what you want when it's time to sell.

Compliance with taxing and regulatory authorities

Mountains of regulation often seem to impede a company's growth and profitability. Some regulations might seem rather easy to "slight" or ignore.

Take for example one of my recent sellers who swore to me that the business had no regulatory violations of any type. I reminded the seller that anything "hidden in the closet" would most likely be discovered in a buyer's due diligence (investigatory) process. "Nope--no problems of any kind" I was assured.

Well, guess what the buyer's due diligence turned up? Seems the seller had a couple of shipping/storage containers sitting behind the building--which the sellers KNEW were in violation of local zoning ordinances. How did they know? They had received four previous "reminders" from the trustees about the containers, and the need to remove them.

"Why didn't you mention that to me, or disclose that fact on your disclosure statement?" I asked. "Gee, nothing ever happened and the township never did anything--so we just figured it was no big deal." Was the seller's reasoning.

No big deal, except when the purchaser turned up the non compliance issue, it threw a few extra wrinkles into the mix. In that case, the issue was easily resolved (yet, much to the additional cost and chagrin of the sellers). But, sometimes known violations are not so easily remedied. In those instances, a seller runs the risk of blowing a good deal.

What's the bottom line?

Clean up any tax, industry, OSHA, EPA or zoning issues with which your company does not comply.

Organize and keep records available. One never knows when opportunity might knock. If and when it does knock, will you be ready to strike while the iron is hot? How many times have you heard someone say something like, "I'd sell anything, including my business for the right price?"

Maybe you have even said it yourself. But would you know what paperwork and documents a serious buyer will immediately need in order to pursue the purchase? When a qualified buyer is ready to begin serious due diligence, they will need a variety of company documents.

Following is a partial list of things a buyer will ask for:

o Three to five years income tax returns

o Copies of one to three years quarterly payroll reports

o Three to five years CPA prepared financial statements

o Current year to date financial statements

o Detailed depreciation schedules listing each fixed asset owned by your company

o Corporate Minute Book with updated minutes

o Recent aged accounts receivable trial balance

o Recent aged accounts payable trial balance

o Company organization chart

o Copy of the Summary of Insurance Coverage (provided by your carrier)

o Information about Employee Benefits provided by the company

o Information about Employee Retirement Plans

o Copies of labor contracts

o Copies of other contracts to which the company is a party

o Copies of licenses, registrations for patents, copyrights, trademarks, etc.

The foregoing list is an example of the types of records your company should have up to date and on hand at all times. These records are extremely important to speed the sales process along. Though this advice sounds basic, I often encounter companies whose records are not complete and up to date. This situation can dramatically affect a potential sale.

I suggest using a three ring binder to keep the basic updated records available at all times. This also makes other business needs for the documents much more manageable.

CONCLUSION

You can increase your wealth by knowing a few simple ground rules for successfully selling your business. Just like other owners of closely-held businesses, you know how to operate your business on a day to day, month to month and year to year basis. But your experience in running the business has not prepared you to know how to sell your business.

While the information I provided in this article is not all inclusive, it should help you get started in preparing your business for a successful sale--no mater when the business might be sold.

Grover Rutter has over 30 years' experience advising business owners. A sought after business broker and consultant, Grover is a CPA, Accredited Business Valuator, Certified Valuation Analyst, Business Valuator Accredited in Litigation and an Empire Certified Business Broker. http://www.gruttercpas.com

Design your tickets so that you can continue to "sell" to your prospects after you leave

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Why Are YOU "Really" In Business?

"I wanted to be an editor or a journalist, I wasn't really interested in being an entrepreneur, but I soon found I had to become an entrepreneur in order to keep my magazine going" - Richard Branson

If you are a true entrepreneur, you will know that to succeed, it helps that you enter a line of business that you naturally enjoy, and would gladly do even if you did not get paid(as tends to happen during start up). The truth however is that you are(I hope) in business to make money in a manner that is profitable - which will in turn enable you stay in THAT business you enjoy, for the long term. To achieve the foregoing purpose, you will need to do cost-effective and results-focused business marketing. One very important - but I believe grossly underutilised tool - for doing that is the Business Card.

I discuss in this article how you as a business owner, can better design your own business cards, to significantly improve your ability to market yourself to those who really need your services and/or products.

Marketing is about creating an impression - a positive impression - in the mind of your intended customer - that YOU or YOUR BUSINESS are more capable of meeting his/her perceived need or want than any others. The more successful you are in creating this impression about yourself/business in the mind of your target audience, the greater the chances that they will choose you over others who may offer the same products and/or services you do. This in effect means, you will be better able to achieve your major business goal of making MORE money, MORE profitably.

This Article Is Meant MAINLY For Non-Employees

Just before I continue, I wish to make the following clarification. The ideas I offer here are mainly for use by self-employed individuals (independent contractors, consultants, entrepreneurs/business owners) - i.e. people who are their own bosses and therefore take decisions that affect how their company is perceived or operates.

For those who work as employees in companies, it is likely that decisions about the type and design of business cards used will be taken with considerations relevant to the company's preferred mode of operation and business vision. I will therefore only say that persons who fall into this latter category, if they find what I say here of potential usefulness to their organisation(e.g. sales/marketing personnel) explore the possibility of bringing it to the attention of appropriate decision makers for consideration.

Is There A Rule Book For Business Card Design?

I am not aware of any rule book that actually spells out what information or details should or should not be on a business card: But if you know of any, I would appreciate your sending me a note about where to find it. :-)

It appears instead, that most people seem to have come to some tacit agreement on the most relevant pieces of information and features to adorn their cards with. Or maybe they just adopted what they found others doing when they entered into business for themselves. Either way, the point I'm making is that I believe each person needs to try and design a business card that works for him/her.

What Does The Conventional Business Card "Say"?

What I would call the conventional business card typically contains information that "says" the following(in addition to some graphics such as a logo, or artistic effects for aestetic appeal):

1. Who you are: Your name/title/business name, and possible qualifications that lend credence to your claims.

2. Contact Info: Phone numbers, postal/physical address, web URL/email(you do have these don't you?).

3. A Tag Line: Punchy phrase about your biz. BUT will these help achieve your purpose?

But the question could be asked: Does the conventionally designed business card work as well as it could be made to? I say NO. I say NO. In fact, after thinking about this issue, I have come to the conclusion that one word best describes the conventional business card - and that's "Passive". It's contents are not designed to be response-generating or action-inducing. I however believe one can adopt a card design that is more "Active" -- hence my efforts at finding an alternative that works, which eventually led to this article being written.

I have always been a bit of a non-conformist - with a penchant for "playing devil's advocate", "rocking the boat", "stirring things up" etc in a bid to challenge others to re-evaluate accepted norms for possible refinement - or total replacement. :-) If I find that the status quo does not offer me what I consider optimal returns towards achievement of a set goal(s), I immediately begin exploring alternative options to adopt, till I find something that gives me the results I want.

Based on the above, the question, for me - as a performance enhancement advocate - on the issue of business cards and how to get the most value from them is: What information do business persons NEED to put on their business cards, to help them MORE successfully achieve their intended purpose for handing such cards out to prospects ?

By the way, with a few possible exceptions, I assume here that the reader - like most people who give out business cards - does so because s/he expects that the cards will further impress(or remind) the recipients to make contact at a later date in relation to the product or service discussed. In my view the business cards many business persons give out are not properly equipped to achieve the full marketing impact potential they possess. Business cards, I believe, can be designed to play a more active - even though silent - role in the marketing and/or selling process.

Think about it this way. Someone you speak with about your work could say "Can I have your card?", possibly because your conversation is interesting enough to them, that they want to be able to contact you at a later date to take it further. However, whether or not you do end up closing a sale with that person could depend on what your card "says"(if at all it has anything to say) to him/her AFTER you've parted ways.

Now, if s/he runs into ANOTHER person who "appears" to offer something similar to what you told him/her you could, s/he might just give that OTHER person the job. But if your card is THE type that "tells"(or reminds) her about specific unique benefits you provide that the OTHER person may not be able to match, s/he is likely to tell the other seller "NO", and come back to you. I say the foregoing here on the assumption that you do actually have a Unique Selling Proposition(USP).

In essence, my argument is that business owners can do a little more thinking to MAKE MORE OBVIOUS, the TANGIBLE BENEFITS they offer, which prospective - and existing - clients would find attractive, and therefore be willing to take ACTION to get. The business owners can then highlight those benefits in form of keywords and phrases on their business cards. Such business cards would subsequently have a greater marketing "impact" on those who receive them, increasing the chances of the prospects making contact at a later date.

A Comparative Analysis Of Two Similar Restaurants With Different "Sales Pitches"

Let's do a little comparative analysis. Say it's 12.30pm and you are driving on a major highway to the next city to do a presentation scheduled for 2.00pm. If you keep driving at the same speed, you estimate you should get into the city in another thirty minutes, leaving you just enough time to check into "Clear View International Hotel", take a shower, change clothes and move into the conference hall on the ground hall of the hotel where the presentation will hold. But you are feeling a bit thirsty and hungry, and worry that there might not be enough time to quickly order something to eat at the hotel(Please bear with me: for some reason, I could not think up a better "excuse" :-)).

Suddenly you get to a junction and notice road signs for two different fast food outlets poisitioned next to each other. For the purpose of this example, we assume that both places actually offer equally quick services and more or less the same variety of foods and drinks. The difference is in the way they describe - on their road signs - what they offer the prospect(traveller), who needs to make up his/her mind.

One sign says "Quik-Caterers! Get Our Quik Travel Meals & Drinks Pack(TM). Wait Max 15 Mins - Or We Pay!". The other says "Welcome To Jazzy Jaff's Fast Foods Restaurant And Bar".

You will agree with me that if many travellers - who are in a hurry - had to decide which fast food restaurant to stop at, they would pick "Quik Caterers" - not because the name sounds better, or more appropriate, but most likely because their road sign offers MORE information - using catchy keywords/phrases - about TANGIBLE BENEFITS the prospective customers can relate to.

Customers are likely to PERCEIVE that "Quik-Catering" is more capable of meeting their NEEDS than "Jazzy Jaff's". Now, imagine the information said to be on the road signs(or some of it) is used on business cards given out by the respective owners of the two restaurants. Chances are that Quik-Catering MD's business card would raise more eyebrows, and probably result in one or two additional queries or comments to him/her(regarding the service described) - creating "openings" for sales conversations to take place.

Look at it this way: Wouldn't you be curious to know(and test?) if Quick-Catering could really deliver on its Wait Max 15 Mins - Or We Pay! promise? It's an attractive - though unusual - offer, but if Quik-Catering only put it on flyers placed on the drinks counter in the restaurant(and not on the road sign or on business cards), less people would get to know about it and stop over.

What Does Your Business Card "Need To Say"?

A business card that keeps "selling" you to your prospect long after you're gone, needs to say what you do in a way that makes those fitting your customer/client profile more likely to realize they actually NEED your product(s) and/or service(s).

You can design your business cards such that they cut down the amount of "work" you need to do to generate potentially valuable sales leads. This is particularly important because many times we come across people who qualify to be our "perfect customers or clients" in first time meeting situations that do not permit lengthy discussions or interactions. So, often times we end up using an elevator speech, answering one or two questions that arise from it, then exchanging business cards.

Some days later, the executive you gave your card to(and who at the same event went on to receive not less than four additional ones from "others like you"), sits in his/her office staring at your card. Among other things, s/he may struggle to recall where/when during that cocktail dinner s/he met you, and what again it was you said you could do for him/her that sounded so good!

This kind of dilemma faces many people who receive the conventional cards I earlier described. Of course s/he sees on the card that you are a CPA, or Certified Coach etc. What s/he does not see on THAT type of card is something(keywords, phrase etc) to help him/her see or recall the "slant" in your offering that sets you apart from others who may offer anything like you do. The result? S/he puts the card back in the desk drawer(or worse: the round filing cabinet - aka "Waste Paper Bin") and (probably) forgets it. Why? Because s/he cannot find a compelling enough reason to take the relationship further by giving you a call.

Think back to the two fast food restaurant signs comparison I did earlier and imagine you are a decision maker for a large company that's trying to choose a caterer to supply snacks to be served at their Annual General Meeting. Looking at the business cards given to you by the MD of Quik-Catering and that of Jazzy Jaff's, all other factors being fairly constant, you are likely to get the "impression" that Quik-Catering will be able to meet your needs more readily, because they sound (from what they say on their road signs and business cards) that they're already thinking along the lines of proving the value YOU seek.

What It Could Look Like: A business card that "sells" you looks different from any your prospect has seen, and creates a lasting impression that sets you apart from the crowd. You can print your information on the front - and leave the back blank, or print on both sides. From testing various designs, I have found that it is useful to leave some blank space on the back for writing answers to "Date We Met?", "Where We Met?", "Notes/Comments" etc prompts that are printed on it.

Actually Jeffery Meyer([http://www.succeedinginbusiness.com]) suggests that you write answers to the earlier listed prompts on the back of cards you get from others - so YOU can remember them, and what they are about. I have taken it a step further and designed cards that let me, "the giver", write that information on the back of cards(which I take with me, as Meyer advises, to important meetings/events) I'm giving out, so as to "help" my prospects remember ME.

Click here to view a web page showing images of sample business card designs that incorporate the features I have discussed in this article(I also offer a FREE downloadable copy of the Corel Draw template I used to create them). Incidentally, my business cards have sort of "evolved" over time as I played around with the ideas I had - until I settled for a particular design/layout. You may also find it useful to let your creativity loose so as to arrive at the best design for your work.

A Business Card That Works Will Help You Market More Effectively & Efficiently

Jeffery Meyer once wrote that to avoid the "feast-famine" syndrome that can plague a business which fails to ensure steady inflow of new work, one must continually search for new customers - and "weed out" hopeless prospects who cost you marketing effort, time and expense, but give you no jobs. For instance, he advises that you take the repeated non-return of your phone calls by a prospect as a sign that s/he does not feel a compelling need for your product or service. Instead, divert that marketing energy and expense towards recruiting NEW prospects.

I believe a business card with the right balance of USP information and aesthetic appeal, can help a business owner use his/her business marketing time/effort more effectively and efficiently. This is because s/he will be able to use the card to create opportunities for discussions about useful benefits of the products and services s/he sells, in a way that will impress a prospective client or customer who happens to be looking for such returns.

It is true that "buyers" tend to be undecided when considering a purchase, but when the "seller" points out the USP s/he offers, AND IF they coincide with the buyer's felt needs, the buyer can become quite "sure" of what s/he wants, to the point that other "sellers" would be unable to influence him/her. Think about some products or services that many people use year in and year out(inspite of the presence of many competing brands), and you will find that they do so because certain needs they consider important are being met through the continued use of those products and services.

Designing your business card the way I describe is more likely to result in the card continuing to "sell" you to a prospect, even after you've parted ways with him/her. The card - each time s/he looks at it - will through its contents remind him/her that you offer THAT unique benefit s/he wants or needs. Of course not everyone you give your card to, will call you back to give you work! Life itself is about percentages. So, what I am saying is that a higher percentage of those you give out your cards to, are likely to get a better understanding of what you can do for them(or for someone they know), and so call(or recommend you). You'll consequently get more sales leads, and/or opportunities to close more sales.

Your Cards Cost Money - Aim To Get A Return On Your Investment In Each!

Print Them Cost-Effectively: I believe most individuals who work for themselves might find it more useful to design and print their own business cards in the quantities they require them. Due to the unpredictability of business generally, one or more bits of information on the card you use may change in a way that will make it necessary for you to re-print another set. If you already have thousands of cards printed, and suddenly discover a need to re-print, all the money spent producing the obsolete set would effectively go down the drain.

You can avoid this. If you have a template setup in Corel Draw to print ten standard size business cards on an A4 sized embossed card paper, for instance(and have used colors economically in the design) your home/office printer should be able to generate a set of cards for your use over a few weeks at a time. As your business operations grow, and you become more certain for the long term about the information you have to put on the cards, you may be able to more safely produce larger quantities of cards.

Think Before Giving Them Out: Considering that you would want the cards you give out to have a pleasing appearance, that complements the USP information printed on them, one expects they will not be "cheap" to produce. That's why you may want to make sure every one you give out counts.

If you can form the habit of thinking of your business card units in monetary terms(each of mine costs approximately $0.143 US Dollars equivalent), it might help you decide whether or not to put it in an envelope to just about anyone you're mailing something to, even when you don't know who they are or what they do. That would be like shooting in the dark - only this time you would be doing so, with MONEY!

If I send out twenty five letters in envelopes to different prospects for instance, and put a card in each, I know it implies I have spent at least $3.575 US Dollars(aside from the cost of envelopes, paper, stamps etc).

Business marketing yields better results when properly targetted at the right audience. You could for instance staple your business cards, to letters you are sending out to CEOs of certain organisations you hope will find your products and services potentially useful. Every time I want to give out a card, I ask myself: Am I sure this is going to help me get increased marketing exposure for my work, that could lead to more business? You might want to ask yourself a similar question periodically.

ONE LAST THING: Read Michel Fortin's Ten Commandments E-book

What I have proposed in this article will require anyone who wishes to try out my ideas to re-visit his/her business concepts and philosophies with a view to distilling the "value" s/he is truly capable of delivering to customers. To do this successfully, I want to seriously suggest you download and READ Michel Fortin's "Ten Commandments of Power Positioning" e-book.

Visit his website at http://www.successdoctor.com and learn how you can get a copy of his excellent e-book(I got mine about 4 years ago). It offers many very practical and tested ideas about how you can market yourself or business more effectively to customers, so that they see you as their preferred provider of your product and/or service range.

To accurately define keywords and phrases that best capture the VALUE you can deliver to your customers, the "Divide and Conquer" concept described by Fortin in his e-book, when properly applied, will help you arrive at the most appropriate ones. Fortin also provides practical real-world relevant tips for crafting YOUR OWN tag lines and elevator speeches; developing press kits etc.

Read that e-book(I actually printed mine out and had it sprial bound) from first to last page as many times as you need to fully understand it, and try applying what you learn to your business through the exercises suggested. By the time you are done, you will know what to say about your business(and also HOW to say it) in your speech, and on any of your business marketing media such as business cards, signs, flyers, letterheads, website etc.

Question: How will you judge whether it's working or not?

Answer: (1). If more prospects make contact with you as a result of your re-vamped business marketing - which incorporates your re-designed business cards - THAT will be evidence that it's working. (2). When your newly acquired clients/customers continue to patronise you and DO NOT express any regrets for doing so(by way of product returns or unwillingness to give referrals/repeat business), THAT would reasonably suggest they are satisfied you deliver the value you "promise".

Self-Development/Performance Enhancement Specialist – Tayo Solagbade - works as a Multipreneur, helping individuals/businesses develop and implement strategies to achieve their goals, faster and more profitably. Download your copy of his 25 Articles Ebook from http://www.lulu.com/content/268555. You get full reprint rights for each article.

Visit Tayo's Creative Business Solutions(CB Solutions) mini-site - http://www.cbsolutions.v27.net - to learn how you can get affordable Freelance Writing, Rapid Website Design/CGI Automation, Website Marketing Strategy Development and Custom MS Excel VB Spreadsheet Automation Services.

A small business selling

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INTRODUCTION

Is it time to sell? Selling your business is a major decision! You have devoted your time, money, and energy to building, running, and operating your business. It may well represent your life's work. You may have already decided that now is the right time to sell, and you want the very best professional guidance you can get. This is when working in tandem with a professional business broker can make the difference between just getting rid of the business and selling it for the very best price and terms!

ARE YOU READY TO EXIT?

If you've gone this far, then selling your business has aroused enough curiosity that you are taking the first step. You don't have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer a lot of your questions and help you through the maze of the process itself.

Question 1

The first question almost every seller asks is: "What is my business worth?" Quite frankly, if we were selling our business, that is the first thing we would want to know. However, we're going to put this very important issue off for a bit and cover some of the things you need to know before you get to that point. Before you ask that question, you have to be ready to sell for what the market is willing to pay. If money is the only reason you want to sell, then you're not really ready to sell.

*Insider Tip:

It doesn't make any difference what you think your business is worth, or what you want for it. It also doesn't make any difference what your accountant, banker, attorney, or best friend thinks your business is worth. Only the marketplace can decide what its value is.

Question 2

The second question you have to consider is: Do you really want to sell this business? If you're really serious and have a solid reason(s) why you want to sell, it will most likely happen. You can increase your chances of selling if you can answer yes to the second question: Do you have reasonable expectations? The yes answer to these two questions means you are serious about selling.

The First Steps

Okay, let's assume that you have decided to at least take the first few steps to actually selling your business. Before you even think about placing your business for sale there are some things you should do first. The first thing you have to do is to gather information about the business.

Here's a checklist of the items you should get together:

o Three years' profit and loss statements

o Federal Income Tax returns for the business

o List of fixtures and equipment

o The lease and lease-related documents

o A list of the loans against the business (amounts and payment schedule)

o Copies of any equipment leases

o A copy of the franchise agreement, if applicable

o An approximate amount of the inventory on hand, if applicable

o The names of any outside advisors

Notes:

If you're like many small business owners, you'll have to search for some of these items. After you gather all of the above items, you should spend some time updating the information and filling in the blanks. You most likely have forgotten much of this information, so it's a good idea to really take a hard look at all of this. Have all of the above put in a neat, orderly format as if you were going to present it to a prospective purchaser. Everything starts with this information.

Make sure the financial statements of the business are current and as accurate as you can get them. If you're half way through the current year, make sure you have last year's figures and tax returns, and also year-to-date figures. Make all of your financial statements presentable. It will pay in the long run to get outside professional help, if necessary, to put the statements in order. You want to present the business well "on paper." As you will see later, pricing a small business usually is based on cash flow. This includes the profit of the business, as well as the owner's salary and benefits, the depreciation, and other non-cash items. So don't panic because the bottom line isn't what you think it should be. By the time all of the appropriate figures are added to the bottom line, the cash flow may look pretty good.

Prospective buyers eventually want to review your financial figures. A Balance Sheet is not normally necessary unless the sale price of your business would be well over the $1 million figure. Buyers want to see income and expenses. They want to know if they can make the payments on the business (more on this later) and still make a living. Let's face it, if your business is not making a living wage for someone, it probably can't be sold. You may be able to find a buyer who is willing to take the risk, or an experienced industry professional who only looks for location, etc. and feels that he or she can increase business.

*Insider Tip:

The big question is not really how much your business will sell for, but how much of it can you keep?. The Federal Tax Laws do determine how much money you will actually be able to put in the bank. How your business is legally formed can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership or proprietorship? If you are incorporated, is the business a C corporation or a sub-chapter S corporation? There are some new tax rules, effective January 1, 2000, that impact certain businesses on seller financing. The point of all of this is that before you consider price or even selling your business, it is important that you discuss the tax implications of a sale of your business with a tax advisor. You don't want to be in the middle of a transaction with a solid buyer and discover that the tax implications of the sale are going to net you much less than you had figured.

WHO IS THE BUYER?

Buyers buy businesses for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. If the buyer is not serious, the sale will never close. Here are just a few of the reasons that buyers buy businesses:

o Laid-off, fired, being transferred (or about to be any of these)

o Early retirement (forced or not)

o Job dissatisfaction

o Desire for more control over their lives

o Desire to do his or her own thing

A Buyer Profile

Here is a look at the make-up of the average individual buyer looking to replace a lost job or wanting to get out of an uncomfortable job situation. The chances are he is a male (however, more and more women are going into business for themselves, so this is rapidly changing). Almost 50 percent will have less than $100,000 in which to invest in the purchase of a business. In many cases the funds, or part of them, will come from personal savings followed by financial assistance from family members. The buyer will never have owned a business before, and most likely will buy a business he or she had never considered until being introduced to it.

Their primary reason for going into business is to get out of their present situation, be it unemployment or job disagreement (or discouragement). The prospective buyer wants to do their own thing, be in charge of their own destiny, and they don't want to work for anyone. Money is important, but it's not at the top of the list; in fact, it probably is in fourth or fifth place in the overall list. In order to pursue the dream of owning one's own business, the buyer must be able to make that "leap of faith" necessary to take the risk of purchasing and operating their own business.

Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses. Keep in mind the following traits of a willing buyer:

o The desire to buy a business

o The need and urgency to buy a business

o The financial resources

o The ability to make his or her own decisions

o Reasonable expectations of what business ownership can do for him or her

What Do Buyers Want to Know?

This may be a bit premature since you may not have decided to sell, but it may help in your decision making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked - and, should be prepared to answer:

o How much money is required to buy the business?

o What is the annual increase in sales?

o How much is the inventory?

o What is the debt?

o Will the seller train and stay on for awhile?

o What makes the business different/special/unique?

o What further defines the product or service? Bid work? Repeat business?

o What can be done to grow the business?

o What can the buyer do to add value?

o What is the profit picture in bad times as well as good?

A FEW THINGS TO CONSIDER

Buyers Want Cash Flow

The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, as well as owner or family compensation. They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.

*Insider Tip

What about the Internet? The Internet is a real "buzz" word - and if its use is appropriate for your business, then developing a web site is important not only to your on-going business, but also to a buyer. Many buyers are conscious of what the Internet is doing for many businesses. If you have a web site for your business, it could be a big plus.

Appearances Do Count

The time to replace that old worn-out piece of equipment is before you decide to sell. Don't assume that a new owner will want to do it or that the price will be slightly lower because you haven't replaced it. The time to "spiff up" the business is now, even if you aren't selling. Fix the sign, replace the carpet, paint the place - make it look good. Even if you're not selling, it's just plain good for business, and you never know when the time to sell occurs. Keep-in-mind that anything that increases sales also increases profits and the all-important cash flow!

Everything Has Value

There are other things that add value to your business. Don't discount the value of customer lists, proprietary products and/or techniques, well-maintained equipment, secret recipes, customized software programs, or good employees. These are termed "off-balance sheet items," and although not used in most pricing models, they add to value. Look at your business very carefully so you don't overlook those items that make your business more attractive to the buyer.

Eliminate the Surprises

Long before you put your business on the market eliminate the surprises! Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises - most of all potential buyers. Whether legal, accounting, environmental, or anything else - solve it now.

*Insider Tip

This may sound like something that should have been done when the business first started, so it may be "after-the-fact". You should create an operations manual. You may already have started one years ago, or simply, have thought of doing one. Now is the time. It may actually create added value to the business. Even if it doesn't, it will impress buyers that you have your business "act" together and should help you sell more quickly and effectively. Preparing a manual on how to operate your business can also be helpful even if you don't want to sell. It doesn't have to be elaborate, just cover the basics. A collection of ads that you have placed a catalog or sample of products, publications, or menus (if the business is food related) is also impressive. Include anything to do with the business that might be helpful for a new owner. However, don't include anything that is proprietary, such as customer lists, suppliers or secret recipes, etc.

YOU CAN HELP

We look forward to working with you in finding a suitable buyer for your business. You, as the seller, are an integral part of the total marketing program. We would like to offer a few friendly recommendations that will help in our marketing efforts. We have checked those items that we think will be especially applicable to your type of business.

It might also be helpful if you took a good look at your business from the perspective of a buyer. Try to put yourself in the place of a prospective purchaser of the business. What would you do to make it more attractive or more saleable? Obviously, the financial records of your business are critical to the sale of your business, but how it looks is also important. First impressions really count! If a potential buyer doesn't like the appearance of your business, the rest of it may never get a chance. If you have any questions, please don't hesitate to call us. It's only by working together that we'll get the best results.

You might want to check the following to see if any of them are applicable:

o Keep normal operating hours. There may be a tendency to "let down" when you put your business up for sale. However, it's important that prospective buyers see your business at its best.

o Repair signs, replace outside lights, etc. You don't want your business to look as if it has been neglected.

o Maintain inventory at a constant level. If you let your inventory slide, your business will look neglected. If anything, increase it so your business will look busy.

o Remove items that are not included in the sale and unnecessary items, especially if inoperative.

o Repair non-operating equipment or remove it if you are not using it.

o Tidy-up outside premises.

o Spruce-up the inside of the business.

COMMON SELLER QUESTIONS

How long does it take to sell my business?

It generally takes, on average, between five to eight months to sell most businesses. Keep in mind that an average is just that. Some businesses will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the business be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their business. This theory often "backfires," because buyers often will refuse to look at an overpriced business. It has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment, generally 40 percent of the asking price or less, the shorter the time to a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business's ability to make the payments.

Why is seller financing so important to the sale of my business?

Surveys have shown that a seller, who asks for all cash, receives on average only 70 percent of their asking price, while sellers who accept terms receive on average 86 percent of their asking price. That's a difference of 16 percent! In many cases, businesses that are listed for all cash just don't sell. With reasonable terms, however, the chances of selling increase dramatically and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases it can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.

What happens when there is a buyer for my business?

When a buyer is sufficiently interested in your business, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, they concern a detailed review of your financial records and may also include a review of your lease arrangements, franchise agreement (if there is one), or other pertinent details of the business. You may accept the terms of the offer or you may make a counter-proposal. You should understand, however, that if you do not accept the buyer's proposal, the buyer can withdraw it at any time.

At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, "The first offer is generally the best one the seller will receive." This does not mean that you should accept the first, or any offer -- just that all offers should be looked at carefully.

When you and the buyer are in agreement, both of you should work to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process. You don't want the buyer to think that you are hiding anything. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, final papers will be drawn and signed. Once the closing has been completed, money will be distributed and the new owner will take possession of the business.

What can I do to help sell my business?

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they are familiar with the business closing process and the laws of your particular state. You might also ask if their schedule will allow them to participate in the closing on very short notice. If you and the buyer want to close the sale quickly, usually within a few weeks, unless there is an alcohol or other license involved that might delay things, you don't want to wait until the attorney can make the time to prepare the documents or attend the closing. Time is of the essence in any business sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal.

What can business brokers do - and, what can't they do?

Business brokers are the professionals who will facilitate the successful sale of your business. It is important that you understand just what a professional business broker can do -- as well as what they can't. They can help you decide how to price your business and how to structure the sale so it makes sense for everyone -- you and the buyer. They can find the right buyer for your business, work with you and the buyer in negotiating and every other step of the way until the transaction is successfully closed. They can also help the buyer in all the details of the business buying process.

A business broker is not, however, a magician who can sell an overpriced business. Most businesses are saleable if priced and structured properly. You should understand that only the marketplace can determine what a business will sell for. The amount of the down payment you are willing to accept, along with the terms of the seller financing, can greatly influence not only the ultimate selling price, but also the success of the sale itself.

CEO of Africabrokers. Silvan a BSc & MBA graduate is a dynamic, results and systems driven business management professional with an outstanding track record of success in delivering critical leadership, strategic plans, and sustainable results in operating efficiency and productivity improvement, technology advancement, cost reduction, sales and revenue performance. Distinguished career focused on innovating new strategic directions, creating revenue opportunities, spearheading policy development, and driving organisational growth and success across broad disciplines. Key Expertise: Business & Strategic Planning, Financial Planning and Capital Raising, Managing Complex Mergers, Acquisitions, Management Buy-ins, Buy-outs and BEE transactions.

Sell a business-12 points for success

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Simply put, selling a business is complex. Business owners who decide to sell their business should be prepared, patient, responsible, and realistic about the process. When owners strategically plan the sale of their business, from start to finish, they put themselves in a much better position to succeed. Below are some essential steps required for successfully selling a business.

Commitment to selling

Deciding to sell a business is one of the greatest challenges that a business owner will face. When debating your company's future ownership, it is imperative that when the business owner makes a rational decision to sell, they see the plan through. It is only human nature to question if it's the right time to sell, but those owners who see their calculated decision through, will be successful in the end.

Bring in professionals

The sale of your business will require the expertise of many professionals. In order to maximize deal value, terms and closure seek out trusted advisors to protect your best interests. In most business transactions, this team would consist of an attorney, business broker, and CPA. Mixed into these roles and responsibilities is that of a business valuator. More times than not, CPA firms do not specialize in business valuations and getting the price right from the start is a must to maximize seller's value.

Selling a business is a long, arduous process full of hurdles and bumps in the road. It is at the business owner's peril if they try to go at it alone. Not only will they most likely encounter unforeseen challenges and mishaps, but their business will most likely deteriorate while they're trying to juggle all of the responsibilities involved in successfully selling a business.

Conduct a business valuation

An independent, third party business valuation is expected in today's business selling marketplace. The objective and value of a business appraisal is to set a fair asking price so that your business assets (both tangible and intangible) are fairly valued and attractive to savvy buyers. The business valuation will validate your asking price, enabling a seller to significantly reduce buyer negotiations and confidently stand by their asking price. In some cases, the professional broker will have access to a reputable business valuation firm and may be able to facilitate the process of preparing your company for a business valuation. Many brokers do offer an opinion of value, but using the expertise of a credible, business valuation firm can be one of the best decisions a business owner will make; inaccurately valuing a business (high or low) can be very damaging to a business seller.

Confidentiality, Confidentiality, Confidentiality

It is obvious that the majority of business owners do not want to hang a for sale sign on their business, alerting employees, customers, and vendors of their intentions. Maintaining discreetness during the sale of your business is a must. All parties advising you on the sale of your business should first sign a confidentiality agreement. You can prepare a simple mutual NDA or ask these professionals for their boilerplate agreements. In addition, all potential buyers will need to sign a non-disclosure agreement before any material information about the business is shared. Once the business is being listed, your broker should operate carefully as a blind business listing is meant to peak buyer interest, not to give them enough details to figure which specific business is for sale. It is at the owner's peril if they do not ensure confidentiality is maintained throughout the process; if a prospective deal goes south or if the seller changes their mind about selling, the business will be protected going forward when confidentiality has been preserved.

Get your affairs in order

When entertaining prospective buyers, they will want to closely analyze your financial statements, both past and current. It is important that all adjustments and reporting be made prior to presenting balance sheets as any material change prior to closing will have an impact on the final purchase price. In addition, larger operations with $5MM+ in annual sales should have their financial statements audited. While this is not cheap, it reassures buyers that your asking price is fair based on legitimate financial reports and studies have indicated this serves as a value driver in purchase price. Other areas you should focus on include lease agreements (if you do not own real estate), key employee contracts, key client contracts, etc. Finally, get your physical business location(s) in presentable order by cleaning, organizing and preparing for VIP visitors.

Package the business

Presenting your company's information to buyers is going to be important to ensure they are informed, educated and more importantly disclosed about the state of your business. They'll want to learn about your operation, industry, financial performance and future prospects. A confidential, presentation package is needed with most buyers. Professional business brokers should be able to extend these types of value added services in order to properly package your business for a professional presentation.

Market the business

Finding qualified buyers that meet your criteria is absolutely critical. This step requires an added layer of discretion. Take time to use the right marketing channels for your type of business, discreetly promote the business to buyers, and rigorously qualify interested parties. The more popular outlets for business listings include local/national newspapers, internet directories, direct mail and networking. Your intermediary should facilitate and execute this step so that you can do the next step. Your representative's role in this phase is to attract, identify, qualify and introduce appropriate buyers for your business.

Keep Running Your Business

While selling your business may prove distracting, it is imperative that the owner continue to run his or her operation; almost as if it wasn't for sale. While you will be making sure your ducks are in row and ready to put on its best face for potential buyers, taking care of your employees and your customers is important. It is to the owner's detriment if business sales decline, staff begins asking questions, and if the sale takes longer than anticipated. Maintain business as usual and let your business selling team run the ball to the goal line.

Entertain multiple buyers

A business seller who is entertaining several qualified buyers is in a position of strength leading up to the sale of a business. Not only will this inherently solidify the value of a business with the prospects of a bidding war, it will ensure the most appropriate buyer is found for the future health of the company. Selling a business is not just about money, it is also about a simpatico with a buyer and their intentions with the business operation. Looking out for the overall best interests of your employees, customers, and brand should be an emphasis for a responsible business owner.

Due Diligence is a two-way street

Following an Offer to Purchase or Letter of Intent, your qualified buyer is most certainly going to conduct due diligence on your business, its financials, customer lists, employee contracts, vendor relationships and other elements you claim to be in place with the sale of the business. While this is a normal process, typically lasting a couple of weeks (sometimes longer based on deal size), due diligence should not just be from the buyer.

You, the business owner, should be conducting due diligence on the potential buyer. Beyond financial buying power and purchase price, you should be interested in their background, intentions with the business and its key employees, management philosophies, maintaining culture, etc. Instruct your business broker to find out why inquiring buyers are interested in your business, ask for a resume, and dig for answers.

Close the Deal

The professional team you assemble to help execute the sale of your business, should serve as a buffer between you and potential buyers when it comes to negotiations. Common areas that are negotiated are purchase price, terms and deal structure, non-competes, owner training/support, etc. Your business broker is a conduit and should be able to effectively represent you when it comes to terms, inclusions, and exclusions. Above all else, it is critical that you not only rely on your broker, but also your attorney, when negotiating, drafting and accepting terms in the Purchase Agreement. The seller's attorney and buyer's attorney will need to actively communicate with one another to get everyone to the closing table and seal the deal.

Don't fumble the handoff

Most buyers will seek assistance from the seller in the transition of the business. The involvement and seller participation is going to significantly vary by industry and type of acquisition, but you should prepare to stay on board for a reasonable period of time. This is an essential step in the successful transfer of a business so that the company's operations, employees, customers and overall stability are protected. Just as a quarterback has to mechanically hand the ball to a running back, so does a seller hand the business off to a buyer. If this is rushed or done in a nonchalant manner, the business could stumble, take a dip and experience rough road ahead. A responsible business seller will dedicate time to work with the new owner, at no cost, typically lasting several weeks to a couple of months. Any period longer should come at the business buyer's expense and a previously agreed upon rate of compensation.

There are all types of complexities in planning and executing the sell of a business. The smart business owner will enlist the services of professionals who can help them carry out a full exit strategy which will most often lead to: securing a higher purchase price, selling to the most qualified buyer(s), ensuring the business is prepared for a handoff, and protecting the futures of existing management, employees and clients.

Contact Fair Market Valuations at 877.VALU.BIZ today to learn more about our business valuation services and to schedule an in-person, no obligation meeting with one of our professional experts.

Scott Gardner is President of http://www.FairMarketValuations.com, one of the nation?s largest networks of business valuation consultants. Scott has been working closely with business owners for more than 10 years, ensuring their sales, marketing, financial, and exit objectives are successfully executed. With more than 400 experts serving all major US markets, Fair Market Valuations delivers face-to-face business valuation to small business owners seeking a future exit from their companies. He can be reached at sgardner AT fairmarketvaluations.com or 877-VALU-BIZ for more information.