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Preparing to Sell your business



Preparing to Sell Your
Business



10 steps to take
now--even if you're years away from selling your business



. Here are several basic steps you should take
to ensure that your business is ready:



1. Get a business
valuation. 
One of the first
things you should do is obtain a realistic idea of what your business is worth
from an objective, outside source. A
 professional valuation will give you a basis for gauging
buyer offers and will give you an idea of what you can expect to net from the
sale. It will also tell you your business's market position, financial
situation, strengths and weaknesses (which you can hopefully correct prior to
putting it on the market).



Valuations can be
obtained from a number of sources, ranging from local accounting firms to
regional business brokers and investment banking firms. As a rule, you should
make sure the company performing your valuation has access to the most current
national
 data regarding privately held transactions in your
industry. Experience in selling firms of your type is obviously helpful as
well.



2. Get your books in order. Buyers evaluating your business generally
require at least three years' worth of financial information. The more formal
your statements (accountant-reviewed or -prepared vs. internally generated
statements), the better the impression you'll make-and the easier the due
diligence for a buyer. Tax returns may suffice.



3. Understand the true
profitability of your business. 
Most privately held businesses claim a variety of nonoperational expenses.
Make sure you have supporting documentation for these expenses. For example,
your business may be paying for your personal automobile lease.



In addition, there may be infrequent expenses
you have incurred during the past three years that should be excluded in a
buyer's analysis of recurring cash flow. There may be moving expenses if you've
moved to a larger facility or unusual legal expenses.



4. Consult your financial advisor. It's wise to speak to your tax advisor for
help planning your financial future. Understanding your personal and corporate
tax situation may also help you recognize your options with regard to deal
structure.



5. Make a good first impression. Will a buyer visiting your shop for the first
time see order or chaos? Buyers look for companies that show well, as an
orderly shop is often indicative of an orderly management team and back-room
operations.



6. Organize your legal
paperwork. 
Review your
incorporation
 papers, permits,
licensing agreements, leases, customer and vendor contracts, etc. Make sure you
have them readily available, current and in order.



7. Consider management
succession. 
If you're absolutely
vital to your business, who will a buyer be able to turn to for help running
the
 businessafter you
leave? You should have a succession plan in place before going to market.



8. Know your reason for selling. Buyers are always curious as to why a seller
wants to exit a business. (If it's so great, why are you leaving?) Be prepared
to articulate your reasons.



9. Get your advisory team in place. Start interviewing attorneys and accountants
who are proficient in mergers and acquisitions. Strongly consider hiring an
intermediary, either a business broker or an investment banker, to represent
you and help you through the selling process.



10. Keep your eye on the ball. Don't let your business performance decline
because you're too focused on the sale of your business. This will only give
buyers additional negotiating power to lower their offers.



Published Thursday, January 27, 2011 1:12 PM by Pete Harrison

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