11 Things You Absolutely Need to Know About Selling Your Business

iUniverse, Inc.

Contents

1. When Should I Sell My Business?.................................................................92. The Boomer Bust.................................................................................113. The First Thing You Need to Know: Understand the Process of a Business Sale.....................154. The Second Thing You Need to Know: What Will You Do Tomorrow?...................................245. The Third Thing You Need to Know: Value and Pricing.............................................286. The Fourth Thing You Need to Know: Buyers.......................................................467. The Fifth Thing You Need to Know: Presentation is (Almost) Everything...........................608. The Sixth Thing You Need to Know: Taxation Drivers..............................................679. The Seventh Thing You Need to Know: Financing...................................................7710. The Eighth Thing You Need to Know: Seller Notes................................................8711. The Ninth Thing You Need to Know: Business Brokers.............................................9212. The Tenth Thing You Need to Know: Doing the Deal...............................................10213. The Eleventh Thing You Need to Know: The Roles of Professionals................................11114. The Other Thing................................................................................114Glossary of Terms..................................................................................117

Chapter One

Selling your business is the most important single financial transaction of your life. For a very few of us who were born with great wealth, are successful serial entrepreneurs, or who hit the lottery that may not be true; but for 95% of us there will only be one exit from the company you built. The years of effort have hopefully paid well as you went along, but most of us are planning a good portion of our retirement around the proceeds from selling the business.

There is an old saying that goes "When is it the best time to fire a salesman? ... It's the very first time you think about it." The idea is similar when it comes to selling your business. The first time you have a rough day and think ... "I don't want to do this any more.", the first time that you look at your employees and wonder ... "Are they better off than I am?", the first time you look at an opportunity to grow and think ... "Being bigger would just mean more work and more responsibility.", it is time to start planning for the sale of your business.

Selling is much more than a transaction. It is the process of making your company presentable, desirable, marketable and financeable. It's knowing who your buyer is and how much he or she can pay. It is understanding what is valuable in your company, and what isn't. Selling your business starts with the decision to sell ... someday. From that point on, you should be preparing for the transaction phase, but the transaction phase is the end game, not the whole game.

Hundreds of small business owners have asked me "What do I have to do to make my business ready to sell?" Fortunately, the answer is very straightforward. To get the most value when you sell your company, do everything that you should be doing anyway to make your business more successful. What is good for you is good for the buyer. It is that simple.

What do you think is worth more to a buyer: a business that depends on the owner for every decision, or one that doesn't? Would you pay more for a company that had every procedure documented, so that a new owner could look up anything he or she needed to know? Would you perceive more value in a bunch of employees who did only what they were told, or ones who could make good day-to- day decisions while you were on vacation?

Would you be more likely to buy a business that had strong financial statements or one where the owner could only verbally describe (wink ... wink) all that he was taking "off the books"? Would you prefer increasing to shrinking margins? Would you rather have a diversified customer base, or one big customer that dictated terms?

The answers are so plain that it probably sounds comical just asking the questions, but many business owners don't think that way. They control every aspect of the business personally (and maintain a crushing personal workload,) by hiring the cheapest talent with which they can possibly get by. They load up the company expenses with personal items to save a few bucks in taxes. They skimp on sales and marketing unless revenues begin to slide, and then skimp on it some more because they don't have any "extra" money.

The best time to sell your business is when you don't have to. Many business owners are reluctant to sell in good times because they are making a lot of money, and won't sell in bad times because they can't get full value. The best time to sell any business is when you want to. If you have made the business attractive to the right buyer; that time can be any time you choose.

Remember; every business owner will exit his or her company sooner or later. It's up to you whether you want it to be on your terms, or on someone else's.

Chapter Two

Much has been said about the coming glut of retiring Baby Boomers. The generation that began in 1945 started reaching 65 years old in 2009. The United States Boomers represent the biggest financial event in history. By some estimates, they will transfer over ten trillion dollars in assets ($10,000,000,000,000) over the next twenty years.

I know that a trillion dollars isn't what it used to be. Before the latest Wall Street bailout and government economic stimuli, we seldom heard the term trillion. Now it has become commonplace in the daily news. It is still a lot of money for people like you and me, however.

The Boomers impacted everything with a pig-in-the-python effect. When they were born, their mothers bought millions of copies of Dr. Benjamin Spock's 1946 book Baby and Child Care, which told them that children should be raised as individuals. Dr. Spock taught that parents should be flexible regarding their children's needs. Discipline was to be used sparingly, and without anger. The Boomers were raised to believe that they were the center of the universe. In many ways, it was true.

As they grew up, the Boomers triggered explosions in school and highway construction, drove the expansion of suburbia, and made mega-industries out of toys (Mattel) and children's entertainment (Disney).

Time passed, and the Boomers enrolled in college at unbelievable rates, pushing growth in community colleges and universities. Then they entered the job market. Corporations which were previously bastions of the nine-to-five workday and the gold watch at retirement were inundated with ambitious and educated young men, and for the first time young professional women, who all expected to climb to the corner office with a big expense account.

There wasn't room for everybody in the big corporations, but the Boomers had come to expect that they could have it all. So they opened businesses in record numbers. Many did not have the basic business skills to be entrepreneurs. To serve this growing market, franchising was born and quickly became the dominant business...