Selling Your Small Business

Selling Your Small Business

Here’s what to consider before you go to market.

By Peter Siegel

Of all the businesses put up for sale, only between 10 and 20 percent actually sell, according to Business Centre.

Here are a few pointers to help you beat the odds and close the deal:

Have these items ready before the business goes on the market to be sold:

• Federal tax returns for the business (last three years).
• Financials – profit and loss statement, balance sheet (last three years).
• Monthly bank statements (last three years).
• Copy of current lease.
• List of all equipment being sold with the business.

Serious business buyers, your landlord, and lenders will need this information.

Make sure you know the correct adjusted net income for the last three years. Adjusted Net Income is: Net income + owner’s salary + depreciation + interest expenses + other business expenses written off (deducted) that may not necessarily be business expenses to the new owner of the business.

Get professional business valuation. A third-party professional business appraisal/valuation works with you, possible business buyers and lenders to ensure all parties feel the price is legitimate. [Seventy] percent of all businesses NEVER SELL, usually due to too high a price (and/or a bad deal structure).

Keep track of all info/contacts. Keep a folder of all contacts, notes, and paperwork for your business. Keep a log of all buyers who contact you (with phone numbers, e-mail address and your notes). Make sure you have backup buyers in case your first choice drops out during the selling process. Keep all escrow info, purchase agreements, signed non-disclosure/confidentiality forms, contact phones of CPAs and attorneys, and other pertinent data/info in this folder.

Write a comprehensive summary of the business. Buyers will need to know many details about your business. Instead of repeating yourself to many potential buyers (risking forgetting many important facts), write a one-page summary of the business. Include:

• History of the business.
• Date established.
• Number of employees.
• Important attributes about the business and surrounding areas.
• Suggestions on how to increase business the buyer takes over.
• Geographic area the business covers.
• The competition.
• Your reason for selling.
• How much training you’re willing to provide after the sale.

Respect confidentiality agreements. Have all potential business buyers sign and date a Non-Disclosure/Confidentiality Agreement before giving out any info. Make sure potential buyers understand the importance of keeping details about the business confidential – and the legal ramifications if they violate the agreement.

Get pre-qualified for financing. Don’t assume it is the buyer’s responsibility to do this. Possible buyers want to know they can get financing before they buy. This saves time – and time kills deals. Do this before you go to market.

Get the signed purchase agreement into escrow immediately. And sign off any contingencies quickly. Make sure you go through the Allocation of Purchase Price in the beginning of the escrow process, not at the end.

Don’t wait forever. A buyer’s Due Diligence should only last 4-14 days. If you have been organized and ready with all important info and documents, this is all the time any competent business buyer (and CPA for the buyer) should need to investigate the business. You 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 isn’t sold until you have the check in hand. Continue to collect names and information from business buyers if you are in escrow. Half of all deals fall out for one reason or another. Try to have two to three potential back-ups.

Peter Siegel, MBA, is a consultant and author with over 25 years’ experience selling, buying, and niche financing small to mid-sized businesses. Founder of and, he writes a syndicated small business blog.

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