There are some basic considerations when it comes to planning the sale of your business.  The most challenging part for me was to make the time to learn how to do it.   I had no experience, I had no friends that had sold their businesses and research was hard to find.  What I quickly learned was that this was going to take some time.  Time for me is a very precious commodity and every day I have to evaluate the cost vs benefit of where to spend it.  I’m often dealing with the day to day concerns and planning 1-2 years ahead is a great concept, but in actuality, is very difficult.  It’s not that I’m a spontaneous person, it’s just I have payroll this Friday and I need to make sure I have the money in the account.  My strong recommendation is that you take small steps and not try to tackle it all at once.   Like all good planners say, the further out you plan the easier it is to hit the target.

In our first discussion we will start with the basics.  As fundamental as it sounds, in order to sell your business, you have to find a buyer.  That might seem easy since you have invested your heart and soul into your company but there are many business owners that have decreasing revenues, work 60 hours week… and are struggling to make it and still think there’s value.  What I often hear is that if the buyer comes in, they can use your business foundation and grow the company.  The value is in the future, not the past.  Well let me give you the truth, buyers base the price on the past and think whatever they do in the future is profit to them.  It’s worth repeating, for a buyer, like it or not, the value is in the past.

So Basic 101 begs the question…what makes a business valuable?  The same perceived value drivers seen by a seller look very different to a buyer.  Since we are looking for a buyer, then we need to understand what they are looking at.  My best advise to any business seller is to try to look at your business through buyer’s glasses.  This starts with good financials, then good business plan and good cash flow.  The financials will be required to get outside financing, since a bank will require two years tax returns.  If you are like the rest of us, business owners run our books to save taxes, not show a profit.  So if buyers look at the past to set value, and they are looking to buy for as low of a price as possible, then don’t try to convince them that you are doing better than your reporting — it doesn’t work.  If you want to sell it, you have to show it.

I’m telling you get your financials in shape first.  Show a profit, book your inventory, stop running personal stuff through the company and make it very easy for a buyer to see the past.  The clearer the past shows makes the future a little less risky.  That’s my step one in Selling Your Business  101.

This entry was posted on Tuesday, March 24th, 2009 at 5:10 pm and is filed under Sell Your Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.