This is the last installment of a series discussing potential pitfalls relating to selling your business.  Recently Tilting the Scales highlighted Successfully Selling Your Business: Top 6 Potential Pitfalls; So You Might Sell Your Business Someday: Do You Need a Broker?; Successfully Selling Your Business: 4 Tips – No Matter the BuyerSelling Your Business: Why Accurate Financials are Important; and Selling Your Business: 5 Critical Deal Points. Today we’re going to discuss why it’s important to have a business plan.   

It’s the end of the year and you have made that decision: you want to sell your business next year and retire.  Congratulations!  Previous installments in this series discussed the importance of deal points, accurate financials and having any legal issues resolved to avoid any pitfalls when you sell your business.  But to get to the point of making a deal with a buyer, you first have to have a marketable business.  A business plan is the essential tool you need to help market your company.

Business Plans are Road Maps for Buyers

The question on every prospective buyer’s mind is “What makes your business so special that it’s worth $_____________?”  A business plan helps buyers understand your assets and why someone would want to buy your business.  For example, a business plan can summarize historical and projected financial data, market share, marketing strategies and analyze your competition.  Your business plan should also summarize what key intellectual property your business owns, as well as any proprietary licensing that is in place.  This information attracts prospective buyers to dig deeper – especially if the business plan is packaged well because it conveys a sense that you run a disciplined business.

Putting it All Together to Tilt the Scales in Your Favor

We’ve talked about a lot of important issues in this series.  If you are looking to sell your business remembering these key points will help your sales process get off to a good start:

  1. Prepare or update your business plan to market your company to prospective buyers.
  2. Have your accountant audit your financials.
  3. Make sure a prospective buyer signs a confidentiality and non-competition agreement before you allow them to conduct any non-public due diligence.
  4. Qualify your buyer. Why waste time allowing a buyer who can’t meet your payment terms or get financing from a lending institution?
  5. Use a lawyer to prepare, review and advise you on all letters of intent or sales agreements.
  6. When negotiating back and forth with a prospective buyer, make sure all of the terms are documented in writing!

Hope you have enjoyed this series.  Merry Christmas and Happy New Year!  See you in 2017.

ABusiness for salemong the growing number of business owners looking to sell their business, JR and Sue Ellen Pawlenty are in the market to sell their darling Pawlenty Energy. This month, Tilting the Scales highlights a variety of issues is its first installment of a series discussing the potential pitfalls that closely-held business owners should be wary of when selling their business.

Top 6 Potential Pitfalls

  1. Personal Issues & Exit Plan – Exit plan, succession and transition, will you get enough? What is your answer to the question, “Why are you selling your business?”
  2. Business Plan – Do you have one? What makes your business special and worth the premium? Why would someone buy your business?
  3. Accurate Financials and Legal/Regulatory Affairs Current – What do your financials disclose about the quality and sustainability of your earnings?
  4. Value & Timing – What’s your business really worth? When is the right time to sell? What can you realistically expect to be offered?
  5. Deal Points – What are your options? What terms are realistic? What terms are critical? Why should you care about reps and warranties? Should you draft your own documents?
  6. Business Brokers & Other Critical Advisers – What should you be looking for? Can the broker help you avoid selling to the wrong buyer? Your accountant? Your attorney?

Be on the lookout for us to cover these issues in depth with the Pawlenty family over the next several months.