Deciding to sell your business is an emotional
decision. Once you think about selling then it
is time to make the move – assuming all decision
makers are on board with this decision. Once you
decide that you want to sell then make the move.
Marv Levy, the NFL Hall Of Fame Coach once said
that “once a player thinks about retiring
then he has already retired.” This statement
by the former Rochester Bills Head Coach and
General Manager applies to business owners as
well. Once you think about selling then you are
already making an emotional move toward selling.
The
first area to understand is that books and
records are important. A business needs to be
able to justify a price through tax returns,
equipment values and inventory values. A pure
“cash business” with no substantiating data is
very difficult to sell. But in these “cash
business” situations where the actual cash flow
and declared cash flow are different, there are
still ways to prove the entire cash flow through
a second “book” or receipts.
The
second area to understand is that you should
keep the business running as is and NEVER tell
anyone that you are selling. Any hint or leak
that you are selling could be catastrophic to
the business and the businesses’ future.
Employees and customers are very good at
noticing changes that may indicate a business is
for sale. This will have a devastating result on
the business.
Once
the decision has been made to sell, you have to
prepare various facets of your business before
taking the step toward selling.
Here
is a general list that you need to prepare…
1.
Up to 3 years of tax returns - including P&L
statements if available
2.
Equipment list & value of equipment at
replacement cost
3.
Value of inventory at your cost (not retail)
4.
Value of real property (if included in the sale)
5.
Copy of the lease if business is on leased real
property
Here is what you DO NOT want to do…
1.
Tell anyone that you are going to sell –
confidentiality is of utmost importance
2.
Change the business models or daily operations
3.
Take cash out of the business that will alter
subsequent financial statements
