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How to Sell Your Business: Begin with the End in Mind

Posted in INSIGHT by msceonet on January 4, 2010

How to prepare your business now for a successful exit later

Looking at your company with the eye of a buyer is key to building value

By Felicia Joy
Senior Correspondent

“Buyers of a business are buying revenue so your books need to be very clear in terms of what money came in and what money was spent,” said Vicki Donlan, a former small business owner who sold her newspaper publishing company to a major media outlet for a lucrative cash payout in 2004. Donlan is now a business broker, helping others sell their businesses or think through what will be required to successfully do so one day.

Vicki Donlan

Although the idea of exiting a traditional career is quite commonplace with the word “retirement” being batted around all the time, Donlan says for some reason some people—particularly some women she has worked with—think exiting or selling a business is failure.

“I don’t know why some people think of it that way but it’s not failure. Selling your business is a great success. It means your business is doing well enough to be considered valuable by someone else and being able to sell it will allow you to reap the rewards of all the work you’ve done over the years,” she said.

Donlan stresses that you should plan for the sell of your business from the early days—or at least as soon as the thought of not doing business crosses your mind. “It can be quite a long process and it’s not one that you want to wait to start when you are already feeling like you want to retire or take a break,” Donlan said.  “It can take 6-9 months or longer to sell a business and if you’re rearing to exit that will be far longer than you’ll want to stick around.  Not to mention the fact that the new owners may require you to consult for a period of time as a condition of the sale,” Donlan said.

In addition to beginning and building your business with an exit in mind, Donlan says the three keys to successfully selling your business are:

  1. Keeping good books.  “You need to itemize all income and every expense.  If you use business revenues for personal expenses your records and files need to clearly indicate that.  Potential buyers are not the IRS so they’re not looking at your books from that critical perspective.  They want to see your business cashflow; they’re looking for revenues.”
  2. Hiring great advisors.  “Get outside professionals to work with you.  You want to take the emotion out of the equation.  You don’t need your mom, sister, cousin or uncle who happen to be attorneys or business advisors involved.  This is not to say they are not talented or competent, but involving people with personal connections to you can potentially complicate the process by adding emotion.  Keep the emotion out.”
  3. Maintaining a professional relationship with employees.  “Your employees may not understand your desire to sell your company.  To them this may indicate that something is wrong when in fact things couldn’t be better.  Keep a healthy distance between you and your employees throughout the life of your business.  At the end of the day, your employees are most interested in how changes in the business affect them—and when you are preparing for a sale or going through the actual process, employees may not see that as beneficial to them, although many times it is.  It was in my business.”

(Listen to Vicki Donlan discuss more about how to sell your business.)


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