FINRA's BrokerCheck

For Sale By Owner

BWD Magazine, Spring 2013

Selling a business is a lot like selling a home...except when it isn't

The scene is a familiar one on any number of cable television’s housing programs: pensive home sellers listen intently as hosts and remodeling experts alike expound on the efforts necessary to prepare their property for market.

The advice isn't too far afield of what awaits a business owner preparing for a sale: it’s important to be brutally honest about the current condition of the business, address potential trouble spots and make sure finances are in order.

Prospective buyers aren't going to be worried about the number of bedrooms and bathrooms, or the color of the paint in the master suite. Instead, they’ll focus on matters such as determining the value of the business, any risks involved in its purchase and whether or not it is complying with the proper regulations.

Investing in the time and effort it takes to address these issues can help ensure the selling process is a smooth one that nets a higher final price. So let’s borrow a page from the home-selling process and look at some of the steps you can take as part of the business-selling process.

Begin with the end in mind.

It's not just a habit of highly successful people; Stephen Covey's advice is something that home sellers consider at the very beginning of the sales process. After all, they’re not just moving from somewhere: they’re also moving to somewhere. So, where is it that you plan to move? What do you hope to achieve from the sale of your business? If the goal is to sell but remain with the company in a management capacity, you’ll likely focus on a few different aspects than if you plan to retire. For example, you might be happier taking a percentage of annual revenue than maximizing a one-time payout.

Go with a pro.

Everyone thinks his or her house is special. There are a lot of memories there; a lot of hard work, too. But the fact of the matter is that those memories and that hard work don’t matter to a prospective buyer. Cold, hard facts matter. Objectivity matters. Which is why having a business valuation may help identify the market value of your business. Like a residential real estate professional, a valuation professional will help you see beyond the rose-colored glasses of ownership to something much closer to reality.

Enhance your curb appeal.

I'm not talking about mowing the lawn, trimming the bushes or slapping on a fresh coat of paint. But just like those measures can make a house more appealing from a distance, selling your business requires a few steps to make sure prospective buyers don’t drive right on by. One of the first things a prospective buyer will request is the financials. High-level, full-disclosure financial statements will make the impression the business is well run. One such step is a financial audit or review. Some businesses conduct annual compilations rather than incur the expense of a full audit or a review, but now’s the time to incur that expense. (Depending on your business, an annual audit might be required, in which case you’re a step ahead of the game.)

The audit isn't just for prospective buyers; it can help uncover any issues you should address whether or not there’s a sale at all.

Referring to a due diligence checklist at this point is also a good idea. The checklist can help you gather up necessary documents and information, including internal management reports and memoranda, policy and procedures manuals, legal and regulatory compliance paperwork, and contracts and arrangements for supplies or services. This is comparable to homeowners having a home inspection conducted prior to placing their house on the market so that problems can be resolved before the buyer’s home inspector discovers them. Visit to download a convenient due diligence checklist.

Be prepared to fall in love again.

It happens. Once all of this work is done, you might decide that the issues you've addressed, along with any changes you've made, have made the business more appealing to you again. Even if it turns out that you simply could not get the asking price you wanted, the aforementioned steps have likely left you in a better position than you were in at the beginning of the process and able to more confidently lead your business into the future, with you still at the helm.

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