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Thinking about selling your business? The value of your business probably represents a significant percentage of your total net worth. If you wish to adequately fund the retirement lifestyle you have earned, you must get every last after- tax dollar and get paid substantially all in cash when selling your business. Here are seven proven strategies for receiving the most value for your blood, sweat and tears.

1. Preplan the sale of your business. This should not be a spur of the moment decision. Rather, it should be well planned in advance. Conventional wisdom dictates that the average American spends more time plannng their vacation than their retirement. While small business owners as a whole do not have the “average” mindset, it is vital that the proper planning goes into the sale to maximize the value.
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2. Maintain complete confidentiality. It is vitally important that your employees, competitors and customers not be aware of your plans, as the loss of employees or customers can rapidly decrease both the value and marketability of your business.

3. Do not put a price on your business. Once you put a price on your business, you create a ceiling, and you miss the opportunity to find the ideal buyer who would have otherwise paid more.

4. Recognize the importance of finding the right buyer. Most businesses don’t have a value that is set in stone. Rather, they have a range of value. This means that different buyers will have different perceptions of the same business’s value. Therefore, it becomes important to pre-plan your confidential marketing effort to gain exposure to multiple buyers, especially synergistic buyers;meaning those buyers who, because of their location, complimentary customer base, financial resources, or market position, can profit more from owning your business and are therefore willing to pay more.

5. Recognize the risks in financing the buyer. Your objective should be to get at least 90%“cashed out”, as the risks involved in financing buyers are very considerable. Be prepared to take at least 10% of the Purchase Price in a Seller Note. These days all knowledgeable buyers want the Seller to have some “skin in the game”.

6. Get professional help. Unless you have a background in taxes, legal issues and merger and acquisition work, you will probably unknowingly make a multitude
of costly mistakes by trying to sell your business yourself. In fact, those mistakes, when combined with money lost from a transaction that doesn’t yield the best possible value, will typically cost you substantially more than any professional and competent assistance would require.

7. Do not pay advance fees. While you ultimately will need help in determining the value of your business and will need the right merger & acquisition firm to take you to market, what you don’t want to do is pay for their services in advance. Their fees should be earned and not paid until they have achieved the results that you want.

If you follow this advice and use good judgment, you will be well on your way to getting the maximum value for your business and moving forward with a well-earned retirement.

Business Brokers are frequently asked for advice on when to sell a privately owned business. With rare exceptions, the core issue is really a lifestyle decision and not necessarily a financial one. For most business owners, operating their business is their life, and if they enjoy it and bounce out of bed every morning anxious to face the day, then it probably isn’t the right time for them to consider selling.

There are SOME exceptions to the above which include:
1. Someone offers you substantially more than what the business is really worth
2. You have reason to believe you have significant health issues ahead of you
3. Your spouse hates the business and wishes that you were no longer involved in owning it
4. You are ready to retire or pursue other passions

Let’s examine each of these:

1. One of the prime reasons this rarely happens is that very few business owners have a realistic idea of what their businesses are worth. What? You don’t know the value of your business? You don’t have a written Business Plan? You haven’t done any Estate Planning? That is bad news for you and your heirs, but great news for your competitors, the IRS and all the lawyers that will end up getting involved before all is said and done! How do you avoid these pitfalls? Many qualified business brokers will provide you with a fair market valuation at little to no cost. Having a Business Plan is typically a function of creating the time to do it. As to the format, most business brokers, community colleges and/or libraries or business books can teach you with little to no cost. You can get an inexpense start on estate planning by attending seminars in your local area and then picking a competent and low cost individual who can give you guidance.

2. Most privately owned businesses lose 50% or more of their value when their primary owner becomes incapacitated or dies. Obviously this is an insurable risk; however, if you have early warning signs or you might be in a high risk category, you should proceed accordingly. What?? You don’t get an annual physical?? That is the equivalent of trying to run your business without either financial statements or getting any professional advice. While you might not be motivated to lose 50 lbs, at a minimum you should know the facts about your health and what you can do about it.

3. Quality of Life is basically the name of the game, and if your spouse is not on board in the ownership of the business, you really want to give the idea of selling a great deal of thought. The old saying is that “Happy wife, happy life”

4. Getting burned out or lacking any challenge in your business means it is time to start thinking about hanging it up (if your net worth will accommodate retirement) or selling and doing something else. Those who live their lives doing something that they enjoy outlive those who don’t! The trick is to not start coasting in your current business before transitioning it to a new owner or else you might decrease its value.

The Best Possible Advice: Enjoy what you do and if the time ever comes that it is no longer fun, plan to either change how you approach your business or start to plan for a transition of ownership. If your plan is to transition ownership, plan it well ahead of schedule and carefully select a team that has your best interests at heart.

The Do’s and Don’ts of Selling a Business

WHEN IS THE BEST TIME TO SELL MY BUSINESS?