We do not mean, are you sick and tired of the Business?

What we mean is, are you and your business positioned for the maximum sale price, offering the best view of a prospective Buyer coming in for a look-see, and can you turn it over with confidence that you are giving the Buyer the best shot at succeeding?  That does not mean you are guaranteeing him/her success; but it does mean that you are providing the Buyer with a positive environment, both inside and outside your doors, and a workable foundation for him/her to take over.

For example, who is the face of the business?  If you are a micromanager, (or is you are simply a solo operator,) and every sale is due to your sole efforts, every problem is handled solely by you, and the Customers only know your name, when dealing with the company, you could be in trouble.  This could mean that anyone coming in behind you could fail before he/she starts, because the company really means very little to the Customers; it is YOU they feel that they deal with, not the ABC Corporation.

It is like when football start John Unitas left the BALTIMORE Colts, (yes, we are still bitter about the move to Indianapolis…)  No matter who the next quarterback was to be, no matter how good his prospects, Unitas was so beloved in Baltimore that the fans were ready to hate the next guy.  (You younger people can replace Favre with Unitas, andGreen Bay with Baltimore…)

Business can be exactly like that.  In some businesses, customers can get a comfort zone with one person, and when he/she leaves, they feel a personal sense of loss, perhaps even a betrayal.  This is particularly true when long term, repeat transactions are characteristic of the daily business routine.  People will frequently wait for the same person to cut their hair, whether the customer is a male or female; people will ask for the same auto mechanic; the same doctor.  When going to a Walmart or similar retail operation, the brand is the issue – you do not necessarily ask for the same cashier.  But if you are a Home Builder, you might ask for the same guy at the local Lumber Yard, because that guy knows your traditional needs and the transaction is viewed as more efficient and secure.

Similarly, populating the business with family members or people that are so, personally close to you that when you leave, so will they, is a huge mistake.  Ask yourself:  What will happen to the business when I walk out the door?  If the business fails after the sale because of the actions (or inaction) of the Buyer, that is not your problem.  But if your business is organized so the company cannot keep going without you, it is unsalable, or at least salable only at a very discounted Price.

Financial issues need to be addressed, before you can sell, as well.  One of the biggest things to bring to order is how expenses are expressed, in order to reduce Taxes.  The more you attempt to legitimately obscure or camouflage your Profits, the less the Bank or the Buyer is going to be willing to accept that Cash Flow as a function of the Price you demand.

And for those of you who just plain hide money – like the guy to accepts cash in his Retail store and simply does not report it to the IRS – God bless you!  But do not try to then use that as a part of the Cash Flow that will translate into a selling Price.  You profited from the fact that you cheated the IRS; do not think that you will get that same money reflected in the Price.  A Bank will simply not honor that kind of thinking, when considering a loan for your Buyer.

And speaking of Taxes, what terms will you need to employ in selling the business, or how should you structure the proceeds for the best tax advantage?  Making these decisions at the settlement table is a radical mistake.

Long term planning is best in other areas – sometimes, LOONNGG term planning means years in advance.  Making certain that your Clients are not too heavily concentrated takes enormous effort and time, to accomplish.  Having one Client that represents more than 20% of your business can heavily reduce interest in your business, or at least be used against you in negotiating Price.  (The 20% number is not engraved in stone, since some Buyers become alarmed when the number goes above 10%, while others will say it is not a problem until the number approaches 40%.)  The issue is that the sale of any business has the potential of a loss of some Clients; if there is a concentration of business in one Client, the threat of losing that one Customer can be catastrophic, and that will weigh heavily on the Buyer, one way or another.

Finally, most small Business Owners do not have a written Business Plan, or if they ever did, they forgot all about them once they got the loan to start or buy their businesses.  When selling a business, having an updated Business Plan can be an extraordinary plus, for the Seller.  It can be the most powerful tool with which to impress the Buyer about the business’ history, and its prospects for the future.  If you have one, use it.  If you do not, consider creating one.

There are many other issues that should be considered.  But these are the most vital, in our view.  As stated, these can make the difference between getting a maximum from your business, or being able to effectively sell it, at all.

(The BAF Group LLC is a full service Business Brokerage, with a history of more than a decade of service. Its Principal Broker possesses 25+ years of Business Sales and Divesture. Although most of our work is involved in the Mid-Atlantic States, we have represented Sellers and Buyers throughout the Continental USA, and a number of overseas Buyers, as well. Some of our listings and additional information about us can be viewed at http://www.bafgroup.com. Thank you for your interest.)

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