Selling a business, no matter how successful it may be, is never an easy task. It requires a lot of time and effort on the part of the owner. Anyone who becomes interested in the business and perhaps would like to make an offer is going to want a tremendous amount of information about every and all aspects of the business before they consider buying it. On top of all of this, your client will still have to find the time and resources necessary to maintain their business and keep it functioning as well as it ever had. And then of course there are those pesky legal fees and obligations on top of everything else. Sigh. So what is the best way for your client to go about selling their business?
First things first, they should inform their employees that they are planning to put the business up for sale. It is much better for all involved if employees find out from the owner rather than from hearing it from someone else. Let them know what the owner expects to come from the sale as far as their positions go. Be positive but also be honest. If they are expecting to be selling the business to an owner who will want to retain the current employees, definitely let them know this. This will probably refrain them all from up and running and dashing after the first new replacement job they can find. It is not in their best interest to have all their workers quitting their company leaving them to maintain all the day-to-day business processes on top of all the extra time they are going to be spending trying to sell it. Besides, should they not find what they are looking for from potential buyers, they may just decide not to sell after all and be left with a business bereft of its valuable employees.
Next they should consider who they may want to sell their business to as well as if the owner still wants to work for the business when the ownership is no longer in their name. Often a prospective buyer will want to keep the previous owner on board to continue running the company. If this is what they have in mind, be sure to get the conditions of their employment in writing. As for who may be the most interested in their company and willing to pay the highest price, consider marketing their business to a larger corporation. Often times, a small business is worth more to an established corporation than it is to an individual. Any corporation that they are currently engaged in any type of cooperative effort with should be targeted as a potential buyer.
The best way to figure what their business is worth and how much they can expect to get for it is to do a little researching into what similar businesses in their area got for their companies. Unfortunately, most small businesses sell for significantly less than what the owner was initially asking for it. Figuring the amount they are likely to get from offers can help to prepare them for the eventuality that they might get less than expected and they may just change their mind about selling at this particular time.
After all of the pre-evaluations, the owner is ready to go for it. The first thing they need to do to get yourself ready for potential buyers is get their paperwork together. Most buyers like to see profit and loss statements as well as all balance sheets for the last five years of operation of the business. Most buyers will be very interested in who prepared their financial statements. If they normally prepare them themselves, they may consider having a firm prepare them just for the sake of the sale. It often looks much more acceptable to a buyer when finances have been taken care of by a professional. However, should they decide to continue taking care of the business finances themselves as they always had, producing a copy of prior tax returns may help to alleviate any anxiety prospective buyers may have in regards to the financial records of the business.
Finally, the owner will need to retain the services of an attorney. There are two key areas where it is strongly suggested they use a lawyer. One is when the owner prepares a circular or brochure summarizing their business for potential buyers. When new owners take over, they sometimes do not have the expertise or zest that a former owner had and the business may not bring in the revenues that it had before the sale. This can sometimes lead to litigation whereby the new owner claims that the business was misrepresented to him in the selling/buying phase. Having an attorney review the material they intend to use to market their business can eliminate lawsuits in the future. The second time it is encouraged that they use an attorney is when they prepare a purchase or sales agreement. Buying and selling a business can be a lot more complex than it looks and the wording of a sales agreement may not say what they think it says.
