Getting ready to sell?

Selling a business and especially a small business isn't easy and yet it is done all the time. The better the homework and preparation are done the better harmony will produce a mutually acceptable value sale package that will be beneficial to all.

When an owner decides to sell immediately a team of advisors needs to be assembled to help and support the sale process; that team should include a lawyer, banker and business advisors. SCORE can help this team.

The owners must make a real commitment to sell the business and then do the necessary homework (the basics will be spelled out in this article). All to often the owners will come up with a wishy-washy commitment and go on the street to "test the market" resulting in a disastrous message to the potential buying community.

Here are the basics you need to know:

Clean house: Literally clean house. Get rid of all the things that don't contribute any value to the ongoing business. This will include things that are obsolete, uneconomic products, mistakes and all the things that are not attractive to the current marketplace. Often this will be difficult because of the personal commitments and decisions. The buyer will be severe about this and will make it a part of the negotiation.

Due diligence: It is common to talk about the buyer doing "due diligence" to evaluate a business with the notion of a possible purchase. The seller should do an even more deliberate "due diligence" to properly describe the business and its values.

A clear simple comprehensive description of the business is a necessity. The description should describe the what, when, who and why the business is for sale.

A current "business plan" is vital for the owner and for the prospective buyers. Business opportunities should be listed and described.

A thoughtful public announcement needs to be prepared to tell the employees, customers and suppliers of the intention and commitment. The distribution of the announcement must be done carefully and thoughtfully in respect of the associates. Assign someone to control the issuance of these announcements or suddenly there will be many resulting in chaos.

Select and assign the marketing team: A marketing ream is vital. The marketing ream can and should be made up of appropriate people to:

* Prepare a sales package

* Look for buyers

* Negotiate with prospective buyers

* Prepare alternatives

The final decision to accept an offer must be made by the owner.

Determine the value: Determining the value is a real requirement and will have separate interpretations by the seller and buyer. The seller will be guided by the "blood, sweat and tears" put into the business and the buyer will be guided by "valuation, valuation, valuation."

There are several valid valuation methods that can be employed. Each business and its characteristics will influence the best method to use. The current value of future income is very important and should be employed in a sensible practical way.

There are many analytical tools available to help and support the valuation.

Valuation will be the center point of the negotiations, when in fact there may be other things that are more important.

Negotiation: The negotiating team is vital. A proper team should be assigned; their authorities defined and they should be carefully taught all of the contents of the company and the sale package, highlights that can excite prospective buyers and the tough issues.

A sale is easy to comprehend, but frequently a business will be purchased to merge into another business, which will change the tenor of the whole transaction.

The negotiating team should rehearse the sale negotiation.

Sometimes it is better for the owner not to be part of the negotiating team to allow a second tier to the final decision-making.

Close the deal: The actions required to close the deal should be developed in the "due diligence." There can be all kinds of complications and differences in the desires and objectives of the seller and buyer that must be agreed upon and others will develop as the sale evolves. A process must be planned and prepared to complete all of these requirements in a timely way.

Ensure that everything is transferred correctly, including:

* Assets or stocks

* Tax values

* Title transfers

* Permits and licenses

* Company name

* Intellectual property

Try to develop a harmony between the buyer and seller to maintain good will and mutual aid going forward.

The Northern Nevada Chapter of SCORE provides free counseling to growing companies and startup businesses from counselors who are retired business executives. For information about counseling or the workshops offered by SCORE, go to www.score-reno.org.