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Crucial Steps For Selling A Business

written by Willard Michlin CPA

Have All Records Ready Before You Go To Market!

Have these items ready before the business goes on the market to be sold: The last 3 years of federal tax returns for the business being sold, the last 3 years of financials (profit & loss statement, balance sheet), the last 3 years of monthly bank statements, copy of current lease, list of all equipment being sold with the business, etc - many parties during the selling process will need this info - serious business buyers, your landlord for a new lease for the new buyer, lenders (for a possible loan/financing for the buyer, note buyback firm (in case you want to sell the note for cash after the business sells). Also make sure you know what the correct Adjusted Net income has been for the last 3 years – have your broker or agent assist you with this. Serious business buyers will want to know this information. Adjusted Net income is: Net Income + Owners Salary + Depreciation + Interest Expenses + Other Business Expenses Written Off (Deducted) That May Not Necessarily Be Business Expenses To The New Owner Of The Business.


Write Up A Comprehensive Summary Of The Business With Your Broker or Agent

Buyers are going to need to know many details about the business being sold. Instead of having to re-explain to many buyers about the business (and probably forgetting many important facts) make a one page summary of the business being sold. Include: History of the business, date established, number of employees, important attributes about the business and surrounding area, what you would recommend to a new buyer to increase business once they take over, what geographic area the business covers, the competition, the reason for selling, how much training will be provided after the sale, etc. Your broker or agent will help you with this task and get you ready for market.


Confidentiality Agreements (Non-Disclosures) Are Important

Have all potential business buyers sign and date a Non-Disclosure/Confidentiality Agreement before your broker/agent gives out any info about your business. Your broker/agent should be aware of how important it is to keep the sale of the business confidential.


Get Controlled Maximum Exposure On The Sale Of Your Business

One of the most important items is to make sure that many, many buyers (ones that are qualified to buy) see the business is for sale. Your broker/agent should expose your business to a large number of qualified buyers. Make sure you get on high visibility business for sale related websites.


Get The Business You Are Selling Pre-Qualified For Financing For Potential Buyers

You are probably saying “that is the buyers responsibility to do this!” You couldn’t be more wrong. This is a critical step in insuring that possible buyers can get financing in the first place to buy the business. This is highly important, since if a buyer can’t get financing from a lending institution that means the owner will have to take back a note, or sell the note after it sells for a discount etc. By doing this step early you will know what some very important options will be for potential business buyers without a lot of time being wasted - and TIME KILLS DEALS! Get this step done before you go to market - take your info/package of info to www.BizBuyFinancing.com


Keep The Negotiating & Communications Moving Forward!

Remember - TIME KILLS DEALS. Make sure when you are in touch with your broker/agent negotiating any contracts, allocation of purchase price, new or restructured lease, etc. always be moving forward. Don’t let any situation sit too long - it will most likely kill the deal!


Get The Signed Purchase Agreement Into Escrow

Get the signed purchase agreement into escrow immediately and sign off any contingencies quickly - remember TIME KILLS DEALS. Make sure you go through the Allocation of Purchase Price in the beginning of the escrow process not at the end which happens most of the time.


Due Diligence By The Buyer Should Not Last Forever!

Due diligence by the buyer should only last 4-14 days. Since you are going to be organized and ready with all important info and documents (and giving this to your broker or agent), this is all the time any competent business buyer (and CPA for the buyer) should need to investigate the business for sale. You and your broker or agent do not want the business off the market for a prolonged period so be firm about the length of time for Due Diligence - get it in writing (purchase agreement) and make sure all parties to the transaction stay with the schedule!


The Business Is Not Sold Until You Have Check In Hand!

Always continue to collect names of business buyers and their phone numbers etc. even if you are in escrow (50% of all deals fall out for one reason or another!) You want to make sure you have a successful deal and a business buyer that is going to complete the deal. Try to have 2-3 potential business buyer back-ups who are willing to take the buyers place within the escrow should the current business buyer drop out.


Keep A Positive Attitude - It Will Happen!

Keep calm and a have a positive attitude. By following these steps you and your broker or agent will definitely find a qualified business buyer for your business! Things happen pretty quickly when selling a business. If you are prepared, keep up on the selling process with your broker or agent, you will be successful!

An excerpt from the book "Businesses For Sale - How To Buy Or Sell A Small Business!" This book covers all aspects of successfully selling and buying a business. To order this book go to www.USABizMart.com/book

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