If you are thinking of selling your business, one of your first questions to answer is more than likely; where do I start?

One of your first starting points is to be clear exactly what is being sold. This may seem obvious but many Sellers think they will deal with it when they get an offer. So let’s break this down and look a little more closely at it.

The two most important things to a buyer when looking to acquire a business, is current cash flow and the potential of the business. From the buyer’s perspective, the cash flow is the fuel that feeds the business to pay the suppliers, employees, landlord, tax man, lenders and of course, leave something left over for them after all their work and capital investment in the business.

For the buyer to achieve the above, they need to purchase all the assets of the business so they understand what each asset does and how it contributes to the cash flow and/or potential of the business. As the seller of the business, it’s therefore important that you make it clear what those assets are and present them in the best possible light.
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The current recession in 2008 and 2009 is marked by how low the economy has gone, the increase in unemployment but most frustrating of all, how long it has taken before the “green shoots” appear. If your business is struggling and you think your only option is to close the door and hand the keys back to the landlord, here are some things to consider.

If the business has excess fixtures, furniture and equipment, turn those items into cash by selling them. There are plenty of options to selling the goods including eBay and Craigslist. Make sure what is being sold is as presentable as possible but again, get some cash into the business and move unwanted items. This could include vehicles and real estate and other excess items. Hopefully the business has a current list of fixtures, furniture and equipment. If a list doesn’t exist, there is your starting point as you may be surprised what you have stored away.
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You’re a business owner who is thinking about selling your business. You’ve been doing this for many years but it’s time to retire, there is a health reason for selling, you’re burnt out, it’s time to sell this business and move to a bigger and better idea that you have.

So step one is the idea to sell. What should step two be? Step two is to make sure you have something to go to that’s better than what you’re currently doing. If you’re burnt out and are thinking of selling but you go to all the trouble to find a buyer of the business, get their offer and all of a sudden realize you’d sooner continue what you’re doing rather than sit on a beach or play golf 4 days a week or whatever. So step two is to make sure you are excited about what you’re going to move to.
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Selling a business comes with a huge number of variables. The following consider 9 important areas you need to work through if you want to successfully exit the business you own.

1. Do I need to create and use a team?

Selling a business is not a solo job.  Just as you have a team around you to make the business successful, putting together an exit strategy and then executing it is a team sport. So don’t try and do it on your own. The members of your team to consider include:

• Accountant or tax agent
• Personal financial planner
• Psychologist or Business Coach
• Insurance expert
• Attorney
• Business Broker

Are you worried about the cost?  Your team will get it right for you, so it won’t be a cost but rather an investment.

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Selling a business comes with a huge number of variables. The following consider 9 important areas you need to work through if you want to successfully exit the business you own.

1. Do I need to create and use a team?
Putting together an exit strategy and then executing it is a team sport. Don’t try and do it on your own.
Members of your team to consider include:

Accountant or tax agent
Personal financial planner
Psychologist or Business Coach
Insurance expert
Attorney
Business Broker

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The process to sell a business is not a quick and easy matter. At the moment it is taking about 8 months to sell a business, if it sells. This means the business sits on the market for about 6 months before finally getting an offer from a buyer. Once the negotiations finish, due diligence commences and closes and escrow opens and closes we arrive at the 8 month period. And this applies if the business sells. Depending on which statistics you read, approximately 75% of businesses never sell.

As the entrepreneur looking to sell and transition out of being a business owner, it’s not a quick process. It can even drag on if the buyer wants the seller to continue in an active role in the business in some capacity. At the end of the day, however, it all needs to make sense to the entrepreneur and the best way to do that is to build a transition plan.
What should be included in the transition plan? A transition plan can overlap with an Exit Plan. An exit plan is essentially a process to exit business ownership. A transition plan is a strategy to manage the protection and eventual transfer of assets or stock in a proactive, tax efficient manner. Essentially an entrepreneur can have 5 types of assets. These are Personal Property, Real Estate, Business Interests, Insurance Plans and Employee Benefits.
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A business should be a constant ball of energy moving in different directions as the economy changes, new tools and innovations come to the market, the stress and strain from competitors and the ever changing demands of customers. This is what gets an entrepreneur out of bed every morning; the chance to do something different, learn something new, to see the rewards of hard work, to plant new ideas and watch them grow or to help someone do something they thought they may not be able to do.

If the entrepreneur loses the hunger to learn, be the vision and leader of the business, it’s time for a change. Because a business is so dynamic, it requires leadership. If this doesn’t happen it will shrivel and die. Capital, time and energy must keep moving otherwise it will fade away.

If the entrepreneur leading the business recognizes it’s good business to plan for a change of ownership and therefore handle the matter in a proactive way, the chances of success are so much greater and so are the chances of getting the highest price possible. There is a very simple reason for this. The buyer of a business looks at and includes many things in their decision making process. However, there are basically two ingredients, the cash flow the business generates and its potential to generate more cash flow in the future. If either one is missing, the buyer will require a discount on the purchase price of the business. If both are missing, it will be a business extremely difficult to sell.
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Most business owners have or understand the value in business insurance. It protects the business in case an insured event happens and rather than the business owner wasting time and losing business by addressing the problem, the insurance company takes care of things. Business insurance makes good business sense.

A good form of insurance but one only the business owner can handle is creating a Disaster Recovery Plan. It doesn’t sound very attractive and it doesn’t sound like a good use of time but let’s consider the following.
If your business was hit by a severe storm, hurricane, truck or car that was out of control, flood, tornado, lightning or hail, earthquake, disease or pests, unusually high temperatures that caused damage to the building your business is in or some other unpredictable occurrence, how would this affect your business? What about a building fire, hazardous materials incident, sabotage, a loss of key staff or power disruption? Perhaps ask the same question in a different way. If something occurred to damage the business and you were out of action for a week or so, could your business survive?
The point of all this is to put a Disaster Recovery Plan together.
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An area that a lot of businesses don’t spend a lot of time measuring but is very easy, cost effective and critical to do is the key performance areas of the business. These key performance areas or metrics can show whether the business has all the parts working together and in a healthy manner or is in need of a tune up or radical surgery. There are a number of key areas to a Performance Plan so let’s break them down.

The first area to look at is the financial statements of the business. The first and most readily used is the Profit and Loss Statement as it shows the income and expenses of the business with hopefully the income greater than the expenses. Just as important, however, is the Balance Sheet as this document shows the wealth of the business. With an up to date profit and loss statement and balance sheet, a trained business appraiser can then calculate what the owner of the business could expect to get if they decided to sell it on the market.
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Email, websites, online bill paying, Amazon.com, FaceBook, Twitter, WI-FI, online banking; how did we survive prior to the internet? The virtual world is all around us and guess what; it’s only going to get more immersed in our everyday life as we look to watching TV and movies on our computer and connect our appliances to computer networks at home.

How does this affect our business? There is no question that data including audio and video are exploding online and helping sell more goods and services. Hand held devices such as iPhone’s and Blackberry’s are growing in popularity, devices that track the GPS to give us driving directions are here to stay. We therefore, if we own and operate a business, need to ensure we use technology how it was designed and this is as a tool to help us be more productive.
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