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Let's assume that you have decided to at least take the initial steps to actually selling your business. Before you even think about placing your business for sale there are some things you should do first. The first thing you have to do is to start gathering information about your business.
Here's a checklist of the items you should get together:
* Three years profit and loss statements
* Federal Income Tax returns for the business
* List of fixtures and equipment
* The lease and lease-related documents
* A list of the loans against the business (amounts and payment schedule)
* Copies of any equipment leases
* A copy of the franchise agreement, if applicable
* An approximate amount of the inventory on hand, if applicable
* The names of any outside advisor's
It is imperative that you understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked - and, should be prepared to answer:
* How much money is required to buy the business?
* What is the annual increase in sales?
* How much is the inventory?
* What is the debt?
* Will the seller train and stay on for a while?
* What makes the business different/special/unique?
* What further defines the product or service? Bid work? Repeat business?
* What can be done to grow the business?
* What can the buyer do to add value?
* What are the profit projections in bad times as well as good?
The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, as well as owner or family compensation.They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.
Long before you put your business on the market eliminate the surprises! Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises - most of all potential buyers. Whether legal, accounting, environmental, or anything else - solve it now.
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