The typical business owner will only sell their business once, if they’re lucky, and so to explain the average 6 month process in one blog is unrealistic.  The reality is that the biggest hurdle in selling a business is the owner themselves.  Yes you, you are not informed and take no, or very little time to prepare, and have little patience when it comes to selling your business.  When the business doesn’t sell, you often times blame everyone else but yourself.  It’s kind of like a parent who blames the teacher or coach for the reason their child isn’t learning or playing.  Remember, don’t blame everyone else for the meal your served when you gave them bad ingredients to make it with.  Listen and learn about the process so you can get educated on what you need to know.

There are three major steps in the selling process. The first, and the one we are talking about today, I define as the preparation of the sale.  In preparing to sell there are three steps to go through and they are self prep, business prep and buyer prep.

Self preparation can be broken out into… emotional, physical (time), and financial.  The emotional step is actually the hardest step of all and blows more deals than anything else.  The reason for that is that our business as an SBO is a love/hate relationship.  We have our self worth, social power, prestige, and money in this business and, for many of us, we have grown it from a baby to an adult.  Change is hard and most people don’t like it.  This change is completely self induced and you will reconsider it more than once during the process.  The physical or time requirement will be 10-15 hours a week that you will need to dedicate to this process.  If you are like me, I don’t have another 15 hours a week and finding it will cost somewhere else.  I understand, but if you’re not prepared for the time, don’t start.  That’s ties to the financial prep, you need to understand how much money you will be required to walk away with and then stick to it.  Find your minimum break point and know where that is so get deep into your personal finances and know your bottom line.

Business preparation is getting cleaned up, evaluating a price, and finding an advisory team.  You will be required to clean out the old crap in the storage room, dust off the 286 Dell computers and paint the office.  Don’t argue, just do it.  A fresh, clean look is always well received.  The next is price and every business owner wants to know what their business is worth.  Let me tell you a secret, it doesn’t matter.  I say that, just like I tell everyone, it is not the price that is important, what’s important is how much you take home after taxes.  Honestly, listen to me here, a good advisory team takes price into consideration but the structure of the deal is really what you should consider.  I know, fight me on it if you want, but it should always be about the net not gross.  Now moving onto the advisory team, this team can be made up of as many as you want but usually they include a CPA, attorney and a transaction coordinator (broker, consultant, investment banker).  Remember a team is only as good as the coach, so make sure someone can coach and lead the team.

Buyer preparation is about you determining who your best buyer would be and they generally break into three categories - Financial, strategic or in-house (family, employee, friend).   Financial buyers are those that look at your Company as a return on investment, like a CD or savings account.  They usually pay less but can cash you out. Strategic buyers are competitors or other similar businesses that when added to your Company make them better.  This theory is the 1+1=3 and they are the highest payers.  Finally, in-house are the easiest to find and least difficult to negotiate, but generally have no money.  They usually want significant financing and the sale becomes more of an annuity than an out right sale.  None of these are right or wrong, just be aware of the general categories of buyers.

So, after you have evaluated yourself, your business, and your buyer, you are ready for the next phase called - Let’s make deal.  Read part two tomorrow and your comments are always appreciated and encouraged.

This entry was posted on Friday, May 8th, 2009 at 9:55 pm and is filed under Sell Your Business, Emotional Selling. 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.