Shanu Singh Guliani

Preparing to Sell Your Small Business
August 4, 2007

My parents, like many other Baby Boomers are reaching retirement age and will likely be selling their business within the next five years. What are some of the things you need to do to prepare for the sale of your small business?

1. Decide what you want. You need to sit down and do some serious thinking about exactly what you want from the sale. Do you want an all cash deal? Are you planning to finance part of the sale price? Can you identify a minimum price that will make you happy?
2. Gather all current financial reports.Businesses on average require about a year to sell once they’ve been placed on the market. So start planning by getting your books in order. Buyers evaluating your business generally require at least three years worth of financial information. Remember serious buyers will demand a high level of comfort, especially about the accuracy of cash-flow statements, accounts-receivable lists, and the assessed value of fixtures, equipment, and inventory.
3. Get a valuation. Now that all your books are in order obtain a valuation—a realistic idea of what your business is worth from an objective source. Valuations can be obtained from a local accounting firm, business broker, or an investment banking firm.
4. Leases/Contracts need to be in place and current. As a prospective buyer I wouldn’t want to immediately renegotiate key contracts with landlords, suppliers, etc. Therefore, do your best to renegotiate all lease and key contracts early and be sure your lawyer sees to it that the new contract is assumable by a new owner.
5. Don’t let your performance level decline. Because you are so focused on the sale of your business don’t let your businesses performance decline. This will only serve as an additional negotiation power for buyers to lower their offers.

Posted by Shanu Singh Guliani on August 4, 2007 | Comments (1)