Selling a Company : Do's & Dont's





If you are selling a company there are things that you can do to help and hurt the sale. By doing these things you not only will help move the sale along but you can also increase the chances that of a higher selling price.

My work as a California Business Broker brings me into contact with business owners on a daily basis. Business owners are generally take charge type of people. Being such, many times they ask me, "What can I do to help sell my company?" In response I have developed a do's and don't list when selling a business.

This list presumes that you are working with a professional business broker, ideally me, your California Business Broker, and the business is on the market.




DO'S

1. Focus on running your business! Many business owners sell because they are burnt out. Therefore many essentially stop working and wait for a buyer to come along. This can really hurt your chances of selling your business. Remember, the selling process can take 6-18 months. Don't stop doing what made your business great.

2. Keep advertising. When selling a company, many business owners cut their expenses. You want to try to maximize profits during this time but advertising is not an area to cut back on. Buyers do not like to see that you eliminated all advertising when you listed the business - it casts doubt on whether or not the sales will remain at their current levels.

3. Keep your inventory stocked. Many business owners whittle their inventory down to nothing. Generally, inventory is negotiated and sold, in addition to the business. There will be time, after the business is sold, to agree on a price for your inventory and, if necessary, sell it down. You need to keep the business operating normally.

4. Focus on sales. The best time to sell a company is when you are having your best year ever.

5. Keep an open mind about who, how and why someone will buy your business. Buyers buy businesses for a variety of reasons. Try to keep an open mind about the deal structure. Often times being creative can make deals happen.

6. Deal with any problems. Employee, customer and vendor disputes should be dealt with before a buyer is in the picture. You do not want a viable buyer to back out because of a unresolved problem that reared it' s head during the due diligence period.

7. Pay your taxes. This applies even if you have an extension. Buyers need financing. Lenders, many times, will need to see the last year's tax returns before they can lend. You can't sell your business until the buyer gets financing.

8. Pay your bills. You want your vendors happy so they want to do business with the new owner.

9. Educate yourself. I have devoted a good deal of time to my website. Use this resource and others to learn about the process of selling a business.

10. Work with a professional business intermediary. Selling a business is different then selling real estate or investments or the practice of law. Selling businesses is our business. It is a full time job and can be challenging. You and your business deserves a professional who has taken the time to learn this profession and the experience of past transactions.

11. Talk with your tax advisor about the tax implications of the sale of your business.



DONT'S

1. Do not commit your business to any long term obligations. This certainly applies to leases. This will make the transaction more complicated than it needs to be. A new owner may have a different vision of where he or she wants to take the business.

2. Do not invest in any new equipment. The only reason to buy a new piece of equipment, when you are selling, is if it is mandated by law or you will go out of business without it. If you buy a new item, especially an expensive one, it is highly unlikely that you will recoup your investment when your business sells.

3. Do not switch any services. If it is not broken do not fix it applies when you are selling a company.

4. Do not tell anyone that you are selling. As I have mentioned before, on www.california-business-broker.com, generally, it is best to keep the sale of your business quiet. There will be ample time to tell your employees, customers, vendors, landlords, etc when the deal is done.

5. Do not hide anything. It will be discovered eventually. Surprises are a big reason deals fall apart.

6. Do not cut hours, employees or production. Try to have your best year ever.

7. Do not wait too long to sell. Many business owners put off selling their business. Timing when to sell a company is difficult. If you are feeling that your business "owns" you then it may be a good time to consider selling. Remember, on average it take 6-18 months to sell a privately owned small or medium sized business. Selling a company is not a fast process. Additionally, the price a buyer is willing to pay is based, mainly, on your business's earnings. If you are burnt out and allow sales and profits to decrease - it could be more costly to wait than to sell now.




Each business is unique and selling a company takes time. This is why many business owners appreciate the value of a business broker. There are not enough hours in the day to keep running a business and to try to sell it at the same time. Selling a company and running a business may be too much to take on at the same time.

Are you considering selling a company? If you are in the Southern California area I would like to learn more about your business.



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