Selling to Private Equity: Do Your Due Diligence

Private Equity FirmsDespite many of the challenges of the pandemic, there’s still a lot of investor money looking for solid and smart investments.  Some of that money is sitting in the pockets of private equity firms, and those firms are increasingly looking at smaller deals to fill out their portfolio of investments.  Private equity (PE) firms present an interesting opportunity to sellers and those preparing their businesses for sale should take a bit of time to understand what PEs are and how to prepare for offers they may make.

What Private Equity Can Offer

While PE has the reputation for buying underperforming companies and then re-engineering their financial, managerial, and operational structures before ruthlessly flipping them, that’s not usually the attitude they bring to smaller, Main Street businesses.

If a Main Street business offers solid growth potential and has a strong team in place, PE can accelerate that success:

  • They have access to capital as needed
  • They can utilize economies of scale (leveraging certain services they may offer to every company in their portfolio)
  • Creating strategic partnerships (this can be with other companies in the portfolio or through their own connections)

Do Your Diligence

Don’t let the term “private equity” intimidate you.  They are just people trying to find a better-than-average return on their investments.  They will definitely do their homework on your business.  But you should be doing the same to them, particularly if you are going to stay on in the business after the transaction or care what happens to your employees if you are slated to leave.

Questions to Ask

The first question you might ask is “What’s your strategy for our industry?”  Follow this up with “Why are you attracted to the industry?” and “Where do you see our business going?”  These are short questions but they should lead to long conversations, particularly if the PE has a strategy and isn’t just looking to spend their dry powder.

You can also also ask the expected questions, like:

  • Can you introduce us to new markets?  New suppliers? 
  • Can you help us develop new products/services?
  • Are there any related companies in your portfolio that we might have synergies with?

Don’t be blinded by the references they might make to how much money they have under management.  What do they bring to the table for your business and your industry?

People to Talk To

You are going to want to call their references.  For PE this would be current and former companies under management.  If they are willing to let you talk to them, you should also talk to those whose deals didn’t get to the finish line or owners who exited sooner than planned.  Also speak to members of corporate boards which the PE has ties to.  

A PE, just like your business, isn’t just a balance sheet and a profit and loss statement.  They have a culture, a way of doing things.  That way of doing things should align with your company’s culture as well.  A PE may want to buy your company outright, or they may offer you a chance to leave some skin in the game to take the company to the next level and have a second exit.  Or they may just want to make a small investment now and see how things go.  Be open to different structures and possibilities.  

Private equity groups and family offices are just one of the many qualified buyers that our brokers keep in touch with on a regular basis.  We introduce qualified buyers to our new listings each week.  If you’d like to be one of those listings, give us a call so we can see if we’re a good fit for each other.

Building “Potential” Into a Selling Price

Building Potential into the Selling PriceInevitably, in discussions with sellers, we hear the phrase, “If the buyer does X,” in which X increases the value of the business. In fact, we’ve shared before the major benefits of one small tweak which buyers made to significantly increase profitability. But that’s the point, that’s a benefit that accrues to the buyer, because he/she did the work. So, when can “potential” additional revenue be factored into a selling price, to the benefit of the seller?

Possibility in the Future

Let’s say your business is B2C and is in a heavily-trafficked shopping center. But, there is a development going up across the street. It’s an apartment complex with 250 units. For purposes of this example, we will assume that the permitting process has completed and approval has been issued, but construction has not yet started.

It is, of course, certain that your business will profit from the increased presence of the inhabitants of the new apartment complex. But how can you factor that into your selling price?  

Firstly, you’ll need to zero in on construction start/finish dates. You can’t just accept those dates at face value: you’ll need to look at the history of the municipality in regard to major projects as well as the contractor(s).  How often are projects completed on time? If they are not completed on time, how far off are the estimates?

Secondly, you’ll need to investigate the actual numbers behind the new traffic. As part of the permitting process municipalities have to issue future traffic estimates. Obviously, those numbers are going to be phased in over time as not all the apartments will fill up the day the complex opens. Don’t only ask the municipality for their data. If your business has a professional association, that association will often have studies done that can tell you precisely the economic impact of a new development in proximity to your location.

Thirdly, you’ll need to deal with the real estate in relation to your business.  If you own the real estate and have it as a separate transaction (best practice), then not only will the value of the business go up, but so will the value of the property. If you don’t own the real estate, you’ll need to get written commitments from the lessor as to what the new rents will be, as the buyer will certainly argue that any potential profits due to the new development could be eaten up by major rent increases, also due to the new development.

With all this information, you’ll be in a much stronger position to build “potential” into your selling price and make a case to a buyer for an increase in the price of your business over what the current financials demonstrate.

Certainty in the Near Future

But that scenario is entirely different from one in which the seller has done something that has not yet shown up in the financials, and may not for some time. Let’s say you’ve signed a contract with a client for which work will begin in a year or two, or with a type of vendor that tends to have long and laborious payment cycles (like the government). How can you build this soon-to-be actual income into a selling price?

We’ve seen this go a number of ways. It’s rare that a buyer and seller will agree on some simple formula immediately. Often we see that a buyer might agree to a percentage of that revenue significantly less than what the seller hoped for. Or, we might see the seller so certain of the strength of this new revenue stream that he/she will ask for a percentage of that new income to be baked into the deal.

Unlike the apartment scenario, in which a shovel has yet to hit dirt, in this scenario, the seller has done all the digging and building and is just waiting for the payback. Rather than an estimate based on an estimate, a seller is now talking about percentages based on a certainty. Hence that “potential” will seem much more immediate to both the buyer and seller.  

Are you facing some developments that you think will spell great potential for your business and want to discuss how it might affect your selling price? We’d love to chat with you about it!

7 Ways for Sellers to Avoid Wrecking a Deal

Avoid Wrecking a DealThere’s obviously a lot more than seven ways to wreck anything in life, not just business transactions. But over the years, we have seen some particular situations come up over and over again that need to be highlighted.  We’ve divided them into things to keep in mind before the transaction begins and during the transaction.

Before the Transaction

1. Price appropriately  

One way to pre-wreck a deal is to price inappropriately so that you don’t get any lookers, much less any offers.  Remember that you’re rarely objective about anything you’re personally invested in, and as a business owner, you also probably don’t have the skillset or experience to know what your business is worth in a particular marketplace.  Even if you’ve done some valuation calculations yourself, for best results, get a certified valuation.  It makes the deal bankable and much more likely to go the distance.

2. Keep confidentiality

Loose lips sink ships.  There’s a reason that saying has come down to our present day.  Confidentiality means your employees don’t get scared off and your vendors don’t let something slip to the competition.  It’s an exciting and momentous period in your life, no doubt, but you can talk about it to your heart’s content when the deal is done and the check has cleared the bank.

3. Be prepared

One of the more tiring but perhaps most necessary aspects of a business sale is the due diligence. We’ve talked about how important it is to have your company financials in order and your taxes up to date (and we’ve also shared stories of what happens when you don’t). You should have up to date paperwork because it will help you run your business better anyway, so get in the habit and you won’t have to do much more when it comes time for a sale.

4. Encourage competition

While ultimately you can only ever sell your business to one buyer, that’s no reason to only have one buyer competing to buy your business.  Some of the best outcomes for everyone occur when there are multiple buyers battling for a business.  As the seller you then get to evaluate the qualities of the buyers for fit with your business and the amount of their offer.  

During the Transaction

5. Stay flexible

You should have your deal breakers clear in your mind throughout the process, but remember to think expansively and creatively about solutions when the buyer is making a demand.  It doesn’t always have to be a binary “this for that” swap.  Sometimes you can ask for something in the future or work out something with the real estate, or ask for a royalty.  That doesn’t mean settling for a bad deal – it just means thinking positively rather than negatively about deal points.

6. Don’t lose momentum

It’s very simple: with delays, deals often die.  Part of our jobs as brokers is to keep the ball rolling, making sure questions are answered, concerns are addressed, and technicalities are noted.  Just as before the transaction begins you need to have your paperwork in order, when you’re in the transaction you need to keep the paperwork going.  It can feel infinite at times, but we promise it’s not: see the light at the end of the tunnel.

7. Stay focused on your business

One of the advantages of having a broker is the chance for you to stay focused on your business instead of pouring all your time and resources into making a transaction happen.  Remember that a buyer wants to see the business as a going concern from start to finish with you, and if your business deviates from the norm during the transaction that can often cause you to take a haircut on the closing price.  You’re the owner until you’re not, so act appropriately.

The most successful sellers keep all seven of these ways in mind from the start to the conclusion of a transaction, but if you even have four of them clear in your mind when we get started, you’re well on your way to success.  

Concerned about one of these in particular?  Give us a call and let us know how we can help.

Why Are You Selling Your Business?

Why are you selling your business?We’ve often talked about the paperwork that you need to put in order for a business sale.  But something often underestimated is the storytelling behind selling a business.  Just as there was a narrative for how you started the business, there’s a story for why you’re selling, and that’s something you need to take some time to capture.

The Easy Questions

The questions you should tackle first all lie in the past:

  • Why did you start the business in the first place?  If you didn’t start it, why did you buy it?
  • What challenges have you overcome along the way?
  • What goals have you achieved?

The Big Question

In between the past and the future is the present, and that most present-tense of questions in this process is always the first one a buyer asks us when we share a business, namely, Why are you selling the business?  Now, there are hundreds of “correct” answers to this question, but only a couple very wrong ones, for example:

  • I think revenue has topped out (this means there’s no chance for growth which puts a damper on the profit needs of the buyer)
  • I’m working too much (this could imply you don’t have processes or key team members in place)

The Hard Questions

The previous questions you knew the answers to intuitively and could answer them just as quickly as they were asked.  These next questions are also in your past, but they are in the buyer’s future.  They also are unlikely to be easily answerable on the spot.  They include:

  • What have you not done, and why?  While it might be unpleasant to revisit failures or missed opportunities, remember that buyers are  coming in with fresh eyes and energy, and with your experience to guide them, they might be able to revisit some of those opportunities and convert them into successes.  We’ve seen it plenty of times.
  • If you were continuing in the business, what would you do first?  What would be your focus?  This gives buyers a road map.  They may have their own (sometimes not good) ideas, but most times they will really value your advice.
  • Why would you be interested in this business if you were a buyer?  This is a chance to speak about the industry and its growth, the fact that it’s a lifestyle business, or how much you enjoy working with the employees.

If you want to explore these hard questions in more depth, we’ve talked about some of them before in an exit interview for sellers.

Remember that your answers to these questions don’t need to be lengthy and detailed, but no potential buyer is going to complain if you do decide to share a lot.  Even better, if you are willing to be vulnerable and share some of your own personal challenges along the way it can put a human face on the business and allow buyers to understand your journey better (and consider how good of a fit it might be for them).  Writing these answers down allows buyers to get to know you even better before a first meeting.  As such, you might even save a few anecdotes or points to share in person to underline some key ideas.

But most importantly, taking the time to answer these questions will help you stay calm and focused on the WHY of selling your business, which will be important on those days when you might be frustrated about due diligence or feel like the buyer’s questions never end.  Selling a business is emotional, though the level of emotion varies for each individual.  A helpful counterweight to that emotion are the cold hard facts of your entrepreneurial journey.

Do you feel like you’ve got a compelling WHY for selling your business?  We’d love to hear about it.  Give us a call!

How to Find a Business Broker

How to find a business broker.Whether last year caused changes in your life, or you’ve resolved to take an entirely different direction this year (or both), buying or selling a business is one of the most important decisions anyone can make.  The successful outcome of these possible transactions will be due in large part to your choice of business broker.  In this article we will talk about how to find a business broker in 2021 (and beyond) to help you make the best choice for your future.

Must Haves

We’ve already said that buying or selling a business will be one of the most important decisions (financial and otherwise) of your life.  That means that hiring the right broker will either be the very first decision a buyer makes or the very last decision a seller makes.  We think there are three indispensable qualities all business brokers should have:

  1. Knowledge.  There’s so much knowledge that goes into being a broker.  Brokers understand the sale process and the worth of valuations, as well as how to properly market and price your business.  They have solid broker agreements that are simple to understand.  They may also have certifications that attest to what they know.  They understand the importance of confidentiality throughout the process and will explore tax and legal questions with you.
  2. Experience.  There is simply no substitute for experience.  Don’t be afraid to ask brokers how many years they have been in the industry and/or how many deals they have been part of.  Now, everyone has to start somewhere in their broker journey, so be willing to consider someone who has a lot of experience in your industry even though they may not have been brokers for decades and decades.
  3. Industry Knowledge.  While brokers work with an impressive variety of businesses, over time particular industries or business sizes become sweet spots for them.  Don’t be afraid to hold out for a broker, or broker team, who have the proven experience.  That experience will often lead to better outcomes for you.

Very Important

These next two qualities aren’t “deal breakers” but we consider them very important:

  • Connections.  There are going to be other people who are going to make this journey with you, bankers, accountants, attorneys, etc.  A broker with a lot of connections can help you find a missing resource of your transaction that you might not otherwise have obtained on your own.  Not everyone networks in the same way, but networking is indispensable for brokers, and also tells you a bit about how they conduct themselves.
  • Likeability/Compatibility with you.  You’re not going to marry your broker, but you should consider the realities of a 3-18 month relationship: you are going to be working together on a serious and intense project, involving highly personal issues, from the start of your transaction to the end.  If your initial meetings aren’t going well, that might be a sign to keep interviewing.  Do not discount the importance of getting along well with your broker: that relationship will keep you going through the challenges that will surely be ahead (as they are) on your business buying/selling journey.

Where to Look

The best place to start, obviously, is with the people you know.  Check with your CPA, attorney, business coach, etc. to see if they know anyone worth checking out.  Next, discreetly put out feelers in your social circle.  If nothing comes up within these inner circles, consider looking up some of the business brokerage/M&A firms in your local area.  Check for testimonials and reviews but also take note of some of the names of the principals and brokers and head over to LinkedIn.  Type in their names and see if you already have a personal connection (LinkedIn will show you if you do).

All throughout the process, remember that knowing where you want this journey to begin (or end) is an important landmark to help you find the right person.  Share those thoughts in any interview with a potential broker: the answers will be a helpful guide to the conversation.

Obviously we’ve got a team of talented people here for every type of business and personality.  Take a look at our team or give us a call today: we’d love to chat with you!

Using a Deferred Sales Trust in a Business Transaction

Deferred Sales TrustThe incoming presidential administration has indicated its desire to tax certain earners’ capital gains at the same rate as their personal earnings.  That has led to us getting more questions here at Apex about ways to reduce exposure to capital gains.  One of these ways is called a deferred sales trust.

What is a Deferred Sales Trust?

Simply put, this is a vehicle one can use to defer capital gains taxes.  This is something that must be set up prior to a sale and, unlike the well known 1031 Exchange which is for real estate transactions, a deferred sales trust does not impose strict, short-term time limits on your proceeds.

How Does it Work?

The trust buys the business from the seller (this can be set up in a contract to be concurrent with the purchase from a buyer).  The seller can set up a contract that allows the trust to pay for the business over time.  In a sense, it’s seller financing…for yourself.  As you withdraw from the trust (on a timetable that you set up, that can be modified) then you will be taxed at that time, and only on those amounts.  Even better?  Those funds can be used to make investments which are not subject to the capital gains that you incurred on the original transaction.

Some conditions include:

  • A third party must be the trustee
  • The trustee can invest those funds in new investments
  • The trustee is responsible for making your disbursements or making modifications to the disbursement schedule
  • Capital gains are to be paid on any principal amount the seller receives from the installment payments.  As we noted above, the trust can make investments and earn income and hence could also be “saddled” with non-taxable (to you) interest on your payments.

What’s the Catch?

We’ve always said that it’s key to not fall afoul of the IRS.  You shouldn’t look at this vehicle solely as a way to “avoid capital gains.”  You won’t be able to.  All you can do is adjust the time of paying those taxes to your choosing, but that also means not taking all the gains from your sale at once.  If getting your proceeds in an installment fashion suits your lifestyle, this might be an ideal way to go.  You can also negotiate the payment amounts, so if you need a lump sum up front before moving to smaller payments, that’s possible.

The main “catch” involved is picking the right trustee.  This isn’t just because this person will be in charge of the proceeds of possibly the largest transaction of your life, but because he/she will also oversee investing that money.  Remember that capital-gains-free earning of new income via investments is a major benefit of this vehicle, so as much as you might want to just ask a family member to “help you with this one thing” you’re probably going to need to bring in a professional who can help you optimize your investments.

Speaking of professionals, that’s who you’re going to want to consult to help you examine a deferred sales trust: a lawyer in consultation with your financial team.  This sort of vehicle isn’t for everyone, but as tax conditions change in Washington, people should examine their options and be prepared to have different ways to execute their transaction, should they wish to do so.

We don’t create trusts at Apex, but we know great people who do.  If you need a referral, give us a call and we’ll connect you.

Buying and Selling a Business in 2021

Buying and Selling a Business in 2021Some people are looking to the new year as some kind of meaningful break with 2020, as if viruses or world events pay attention to a calendar and begin or cease based on what we call a “new year.” Unfortunately, that’s simply not the case. We’ve seen a lot in our time as brokers, but 2020 has been one for the books. But, we’ve also learned a lot, and we want to share some of those thoughts with you in these final weeks of 2020.


We talked about financial implications for business sales in an election year back in January. It seems as though there may be some change coming, though it is unclear how soon that will happen, as legislation needs to pass through the House and Senate before landing on the President’s desk, and as of right now, the makeup of the Senate is still undecided. Any other year that might be crazy, but in 2020, it registers as just above ho-hum.

Takeaway: The uncertainty about the election is now over. The uncertainty about what comes next will now commence.


We told you all about PPP when it was first widely available and then we wrote about PPP forgiveness when it recently started to happen. While the question of PPP loans on the books were holding up deals both because buyers were concerned about the status of the loans and banks were unsure how to classify “possibly forgivable” loans, that’s going to be less and less of an issue as more loans start to move through the forgiveness cycle.

Takeaway: The uncertainty about the status of PPP loans is mostly over. But there’s uncertainty as to whether there will be additional support or loans in the new year with a new Congress.

The Markets and Banks

The markets have reacted unusually, to say the least, this year, both at home and abroad. Even as trillions of dollars were added to the national debt, the markets acted bullish at times. Banks, as we might have expected, got more cautious and started asking questions we had not seen before.

Takeaway: It has not yet been a full calendar year since the shutdowns began. When businesses are able to start comparing month-to-month starting in March 2021, the markets are bound to react.


So, as we can from the examples above, 2021 will change nothing in terms of certainty.  Indeed, business, like life, is filled with uncertainty. Every other year we have sold businesses we’ve never made guarantees, and this year is no different. You can buy a healthy business, and through your own bad practices, run into the ground. We’ve seen it.  You can buy an ailing or average business, and build it up. We’ve seen that too

In 1939, no one was saying, “Well, let’s wait until 1940 to see how things go.” We have no idea how things may go with Covid-19, or whatever other diseases or disasters may be looming out there for the human race. But while we know life may seem to slow down during national and international crises, yet it must go on. You have to ask yourself how long you are willing to put your life on hold in exchange for more certainty, which cannot offer you any guarantees anyway. And if there is no more certainty one year from now, you will have lost a year that you could have used to buy and build a business, or sell a business and enjoy the rewards.

We don’t have all the answers, but 2020 has simply reminded us of what we’ve always known: in troubled waters, we have to keep rowing while keeping to our principles and adhering to our compasses as best we can. We are here to help you do the same.

3 Reasons Deals Fall Apart

Three Reasons Deals Fall ApartThere are many reasons deals can fall apart, some of which are too crazy to be believed. But we do see some that occur regularly, and in the hopes of educating our readers so that they don’t fall into these same traps, we want to discuss three of them. 

1. Attitude

It’s not important that the buyer and seller become best friends. But we do think they should meet. And they do need to have healthy professional and personal attitudes before, during, and after the transaction.

Professional Attitude

This process takes time. A lot of it. It will really feel like a job, at times. You will need to keep in mind that this is just how business transactions happen. Boxes have to be checked. Diligence has to be done. Leases have to be negotiated and handed over. Banks need to look at spreadsheets. Sometimes the SBA is involved. It’s not personal. It’s just business.

This attitude also means that a buyer doesn’t have an ego-driven notion of what the business is worth. A business’ price is subject to two things, primarily. A valuation, and market conditions at the time the seller goes to market. A buyer can object to these realities, but the ones who get to a successful transaction are the ones who are willing to undergo an attitude adjustment and get away from what they think the business is worth and focus on what the market thinks it’s worth.

Personal Attitude

At times, negotiations and diligence items can feel personal. While those feelings are understandable, the reality is that none of it’s personal. Buyers are looking under the hood, trying to make sure they understand everything they can to make a successful go as a new owner. You’re not used to being scrutinized as an owner, after all, you run the place. When you are feeling discouraged or want to lash out, stop typing that emotional email and give us a call. What’s great about being a broker is that we’ve seen both sides of transactions so many times that we’ve probably come across your particular flavor of discontent (and we know how to help you deal with it).  

2. Failure to Disclose

There are many things that can come up before and during a transaction. People can have personal problems that directly affect their ability to sell a business. For example, a business partner can end up refusing to cooperate or a spouse may not be willing to wait until after a transaction to file for divorce. Sometimes leases or liens (or even court cases) get “forgotten” about.  

There are many remedies we have to deal with challenges, but we can’t help fix what we don’t know about. There are a number of times that we’ve been in the weeks, days, and even hours leading up to closing when we find out something that puts a screeching halt on everything. The retort of, “I didn’t think it was that big of a deal” is usually heard. Anything you can think of that you might disclose, mention to us. You’re never going to hear a broker respond, “Why did you waste your time telling me that?” More information means we’re better equipped to help you.

3. Business Neglect

As we mentioned above, due diligence and preparation for a sale can (and often does) feel like a job on top of running your business.  The more prepared you are (clean books, timely tax payments, coherent financial statements), the less time you are going to have to spend getting those in order for a buyer. Your business and your employees need you to continue to function at your best not only for your own financial well-being (you don’t want the business to stop performing well) but for the incoming buyer (you want them to have the best start possible).

In the worst cases, businesses get neglected enough by the seller to cause a material change in the value of the business, which can lead to a renegotiation of the price. Don’t let that happen to you. Keep your eye on the deal and your business, knowing that patience and a good attitude will bring you to a successful conclusion.

We want to make sure your business deals get to the finish line, not fall apart. Contact us today to see how we can help you!

Three Reasons We Might Not Take Your Business Listing

Three reasons we might not take your business listing.The truth is that we are always looking to add to our inventory of listings. We want to give potential buyers as many choices as possible. It reassures them that they are choosing from the best of several opportunities, not just fighting for the scraps of a handful of listings. But that doesn’t mean we’ll take every listing that comes our way. In fact, sometimes we have to simply decline to list certain businesses. In this article we’ll discuss the three biggest reasons why we might not take your business listing.

No Clean Books

Serious business owners don’t just have clean books and regular access to intelligible financial statements, they actively use them in order to understand the health of their business. Clean books mean not just putting charges and expenses into some catch-all category, but being as specific as possible as often as possible, so that you can see changes month-to-month, quarter-to-quarter, year-to-year.  

Clean books are inextricably linked to being on good terms with the IRS.  You should have no serious tax issues nor should you be playing games in order to evade taxes.  While the IRS is the immediate issue for those who don’t take regular payment of taxes seriously, no buyer feels comfortable getting into a transaction with someone who feels comfortable trying to pull one over on Uncle Sam.  

No Processes

Almost every month in these pages we will talk about a variation of this familiar theme: have systems and processes in place. If you’re building a business to sell, it needs to be able to not just survive without you, but thrive without you. A good rule of thumb is 30 days. If your business can survive without you for 30 days, then you have something that you can probably sell. If it can’t, you probably own a job.

Every buyer dreams of being handed some kind of manual that explains everything about how the business runs. If you want to sell your business someday, you need to be writing that manual now.

Bad Attitude

There are many ways that sellers can have poor attitudes, but the two we confront most often are: 

  • Some fixed notion about what the business is worth, tied to emotions instead of hard financial facts.  Valuations, not opinions, help determine what a business is worth.  The market then determines how true that valuation is.  Neither the valuation nor the market cares about what you think the business is worth.  
  • Slowness or obfuscation when it comes to key documents or key questions we have about the business.  The way that you work with your broker is a good indicator of how you’re going to work with a buyer.  If you can’t (or won’t) answer important questions or get us key documents to help us understand your business and decide whether we will accept your listing, there’s very little chance you’re going to make it through due diligence, when the both patience and timely responses get you to the finish line.

Any one of these reasons is enough for us to refuse a listing, but the good news is that each of them can be turned around, with a little self-awareness and a lot of sincere effort.  If you need help with addressing these problems, don’t hesitate to contact us!

Five Steps to Selling a Business

Apex Business Advisors: Five Steps to Selling a BusinessAnother article about selling a business? Well, we’re business brokers, so we believe in stressing the fundamentals. A business sale is often the most significant transaction an individual participates in during his/her lifetime. And those who master the fundamentals have the most successful transactions.

Step One: Assemble Your Team

There are four key team members you should have assisting you in your transaction:

  • Accountant – This should preferably be the accountant that you have always had working on your company’s finances. But in case he/she doesn’t have the bandwidth/desire to assist you with this task, you might bring in someone else with experience in business sales and tax strategies.
  • Financial Planner – This person should work hand-in-hand with your accountant to figure out what to do with your free-and-clear proceeds that result from the sale. They can often offer you strategies to maximize value and lessen tax exposure.
  • Attorney – Someone to represent your legal interests in the transaction. If you don’t have a trusted resource in this department, we have trusted partners we can refer you to that we work with often.
  • Business Broker – We’re going to help make sure this team is pulling in the right direction. Most of all, we’re going to help you stay focused and on track towards the closing date.

This team is what you’ll need for most Main Street (less than $5M annual revenues) transactions, but it can definitely expand as the transaction size increases, to help cover the increased diligence issues.

Step Two: Prepare Your Paperwork

Before selling your business, you can get ahead of the game by asking your broker to get you a diligence checklist for a business that is in your industry or comparable in revenues. The longer you have to work on this list, the less it will seem like term papers of long ago and more like a simple marathon with milestones you keep hitting.

Step Three: Think About Deal Points

There’s no way for you to anticipate what a person buying a business will have as his/her “must haves”. But you can certainly make your own list, as well as your own “red lines” that you won’t cross. Keep in mind that this needs to be a discussion you have with your broker. In your own mind, “must haves” can be very serious, and red lines can be very red indeed. But that might be simply because we’re lacking context or don’t have information about alternative ways to proceed.

There are thousands of ways to get a deal done (we’ve seen most of them!) so if you’re proactive, your mind will be in “deal” mode when you start dealing with a buyer. That means you’re flexible. Flexibility often wins in transactions of all kinds, not just in business sales.

Step Four: Look at Comps

Your business may be worth a certain number in your mind. We always remind our clients that their business is only worth what someone will pay for it during the particular time period your business goes to market. Start with a professional valuation, then talk to your broker about current supply and demand in the market for comparable businesses.

What kind of deals are getting done right now and how does that relate to me and my business?

Step Five: Stay the Course

The deal is not done until the paperwork is completed and the check clears. Period.

Make sure that you have operational support as you’re going through this process. Working on a business sale is a part-time job. You want to make sure that your company doesn’t suffer as a result of doing all the things we’ve discussed above to move towards a successful transaction. If you need help, ask. If you’re struggling, tell your broker. But you don’t have to do this alone, and it’s okay to admit you need help.

Do you feel like it might be time to sell your business? Let’s talk about it!