Gearing up to sell the business

I”™m starting to think about selling my company. What can I do to prepare?

Figure out what you want from the sale. Make sure the financials tell the story you want to tell. Do what you can to get the business to run without you. Decide who will most likely value what you have and who can afford the purchase. Build a team of advisers and a backup plan.

Start with some basic questions. Do you want out, cash in hand? Do you have a minimum amount you need to make from the sale? Do you want a job with the new company? Are you planning to do additional work in the industry or do you want to walk away and never look back?

Thinking through a list of potential buyers is crucial and goes back to what you want out of the deal and what are your company”™s strengths and weaknesses. You probably know as much as anyone about other players in your industry.

That”™s an obvious place to look.

Once you”™ve gone through industry players, start to list less obvious options. Who is looking to get into the industry? Who wants clients and client relationships like the ones your company has already built up? Who is looking for proven human capital talent? What processes does your company have in place, that you”™re particularly good at, and who would find those a benefit in their business?

Get your financials well organized and clear so a buyer trusts what you”™re telling them. Don”™t be afraid of showing your company”™s weaknesses, such as too much overhead, not enough sales, too much debt or not enough reserves. Many buyers look for problems they can fix and profit on. And the problems will come to the fore when you go through due diligence, so you might as well be upfront.

You may or may not want to tell your team you”™re thinking of selling. On the one hand, they”™ll figure out something is up sooner or later anyway. On the other hand, they may get nervous and start looking for a job. You can offer key employees an incentive to stay through the sale and transition. You can also get an idea from potential sellers as to what they”™re looking to buy. If they”™re looking for talent, it will be important for you to do some selling to your employees on the advantages of sticking with it.

When considering buyers, look for bigger, profitable companies. You want to be sure your potential buyer has the muscle to get the deal done. They are likely to be more sophisticated and more demanding. Don”™t let those traits discourage or intimidate you.

Review your list of current advisers. Do you have an accountant and a lawyer who have experience helping their clients negotiate their way through a sale? Do you have a business broker who can help build a target list of potential buyers? Who do you trust to advise you as you go through the ups and downs of finding a buyer and closing a deal?

Consider your options as you start to go through the selling process. Find more than one potential buyer, at least a primary and a backup. If you”™re not sure you”™ll get what you want out of the sale financially, make a plan for how you”™re going to close the gap ”“ with the business or outside of it. Negotiate from strength because you”™ve already figured out how to deal with the variable.

Looking for a good book? Try “Sell Your Business Your Way: Getting Out, Getting Rich and Getting On With Your Life” by Rick Rickertsen.

Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. Questions may be e-mailed to her at AskAndi@StrategyLeaders.com or mailed to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Phone: 877-238-3535. Visit www.AskAndi.com for archived articles.