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 Buyer; Selling 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:
- Prepare or update your business plan to market your company to prospective buyers.
- Have your accountant audit your financials.
- Make sure a prospective buyer signs a confidentiality and non-competition agreement before you allow them to conduct any non-public due diligence.
- Qualify your buyer. Why waste time allowing a buyer who can’t meet your payment terms or get financing from a lending institution?
- Use a lawyer to prepare, review and advise you on all letters of intent or sales agreements.
- 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.