12 TIPS FOR SELLING A BUSINESS
- Recognize the imbalance. Buyers buy regularly; sellers seldom sell more than once. It is not an even match. Prepare accordingly.
- Look beyond the pitch. Suitors aim to please. Owners tend to rule. Investigate buyers.
- Be realistic. Art is "Auction"ed; houses are sold slowly. Most businesses are analogous to houses.
- Commit to explore, not to sell. Go slowly before shaking hands on a price.
- Get ready early. After an "Agreement in principle", delay equals risk, and incomplete papers will postpone the closing.
- Sell future profits. Document these expectations.
- Assume nothing. Run the business, right up to the closing, as if it will be yours indefinitely. It might be. Decisions made in anticipation of a closing can be costly.
- Invest in audited financial statements. Financial statements assume huge importance; more than ever before. They permit you to (1) close faster (less investigation), (2) make fewer, shorter guarantees, and (3) demand more cash at the closing. Audited financial statements make you more nimble. With them you can switch readily among suitors; you may not want to, but buyers will know you could. Buyers seek confidence in future performance; past performance, audited, is the best indicator. Higher confidence equals higher price.
- Understand the financing. Before signing anything, know the buyer's financing plans. Know the sources of equity, bank debt, or subordinated debt. What will the balance sheet look like after the closing? You should know, but you won't be told unless you ask.
- Remain on guard. Competition among buyers is a powerful force to protect you in negotiations: it often breaks down, to the seller's disadvantage, after an agreement in principle is signed.
- Disclose everything. Problems uncovered late threaten both the price and the deal itself.
- Take charge. Experienced professionals can coach, but you must execute. You have the big economic stake, and you, unlike your advisors, may go to work for years for the new company. Don't give up the helm.
This is excerpted from How to Sell your Business (and get what you want!) (244 pages, Gwent Press, 1998/$24.95) by Colin Gabriel. See a detailed Table of Contents at http://www.bookzone.com/feature/sellbusi.html on the Internet.