Planning and Preparation for a Business Sale

Deciding When to Sell

Deciding when to sell may be an arbitrary decision. If you are like most business owners, the idea of selling your business pops in and out of your mind, the idea highly attractive at times, only to be put at the back of your mind as a rush of new orders need to be fulfilled.

The reasons for selling are numerous, and it may be surprising to you that a business owner's motivation for selling is one of the first things a prospective purchaser will ask about. Retirement, relocation, a change in career, are common motivations for selling. Some business owners will sell when operations become too large to manage personally, or they lack the ability to provide capital necessary for expansion.

It is important to make plans for a transition before the signs of burn-out and apathy show up on your financial statements. Businesses that show downward sales and profit trends tend to scare purchasers away and/or erode the optimum value you might receive for your business. If you know that retirement or a change in career is immanent, start making plans to find the right successor to your business. The optimum time to sell your business is just prior to its peak. At that point you are most likely to sell in a timely fashion, and achieve the best compensation package for your business.

Allow yourself ample time to find the right purchaser. It often takes three months to a year to find the right party, and another sixty days to complete the transaction.

Cutting The Umbilical Cord

When your customers call, are they calling for you, or is it your company name they identify with? Could any one of your qualified employees handle their needs? Are you the key technologist, the only one qualified to provide the service or product your customers demand? Can you take a two week vacation, and feel satisfied that your business will continue to run smoothly?

A prospective purchaser will want to be assured that the bulk of your customers will make it through a change of ownership, and that the products and services your company delivers can continue to evolve. The transferability of a company and its customers directly affects a company's perceived value.

If you are indispensable at your company, and would like to sell your business within the next few years, making efforts to share your customer relationships and operations duties with key employees can help accomplish a successful transition.