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Preparing to Sell Your Company
By Glen Cooper, CBI, CBA, BVAL
What is a “Someday I will Sell” file and why should you have one? What do we know that you don’t? Only that most of us (who are smart enough or lucky enough not to go broke!) actually do eventually sell. This article is about the steps you take to get ready.
Start by Creating a “Someday I Will Sell” file
A “Someday I Will Sell” file should contain everything that business brokers have sent you over the years, names of potential buyers you’ve run into or thought about, press clippings and samples of your marketing materials and those of your competitors, copies of your last three years financials and any industry information on trends in your marketplace.
This is not a complete “due diligence” file that the broker and buyer will eventually build, but it’s a start. It’s actually all you need – the ideal file – for that first visit with the broker.
Every business owner gets letters and brochures from brokers. Save them! Even if you think your sale is several years off, keep their letters, cards and brochures. When it finally comes time to evaluate your alternative choices for a broker, you’ll have a more complete picture of what they’ve said before, and who was in the business when.
It’s not unusual to have people tell you they’ve always wanted a business like yours. When you hear that, capture their name and find out what’s really on their minds. Keep that contact and a record of the conversation. They may never buy your business, but just remembering what they said gives you good food for thought. If you think of somebody who should buy your business, write that down, too, and put it in this file.
Save that marketing material! Publicity you’ve received, ads you’ve run and photos of products, staff and real estate. We’re not looking for a scrapbook here, but anything that will help a broker or potential buyer understand why your business is attractive.
Press clippings help tell your story. Your flyers, brochures, newsletters, mailings, catalogs, product literature, and copies of ads you’ve run complete the picture. Photos of your products, staff and real estate may also be useful. If your own your real estate, diagrams and appraisals offer key information. Brokers need lots of background material to compile an “offering memorandum” about your business.
Competitors’ marketing materials can also be “keepers.” Not everything, of course. But, when you get some “inside” marketing material that’s detailed, keep it in this file. Brokers and buyers will be reviewing your business’ place in its market. Whatever helps them to understand your unique position should be kept.
Make extra copies of your business’ Federal income tax return each year for this separate file. Brokers and buyers always want the last three years. Keep a computerized equipment list up-to-date in this file. If you have budgets or special analyses of your sales performance (like sales by month), keep that here too.
Eventually, brokers and buyers will need much more financial information than just these few items. But, most of what they will need later will be current performance data. Keep information on the historic financial trends of the business in this file.
Finally, when you see a good article about important issues and long-term trends in your business, make a copy for this file. If your trade publication runs an annual industry review, save it here. If they survey members, participate in the survey so you can get a copy to file here.
Be Creative In Your Response
Everybody’s files are different, but all business owners have some type of filing system. Our “Someday I (We) Will Sell” file at Maine Business Brokers is actually divided up into several files (yes, business brokers can sell their businesses, too!). We have a wide variety of sub-files under file areas we call, “Management Information,” “Marketing” and “Operations.”
Our “management information” files are all about goals, budgets and financial data; our “marketing” files have our advertising, artwork, photos, publicity and competitor information; our “operations” files are broken down by area into various organizational, personnel and policy sub-files.
So, my advice in this article may be taken literally or creatively. When you go to create your “Someday I Will Sell” file, feel free to create it in any style you want. The point is to have the information in an easy-to-retrieve format.
See A Broker BEFORE You’re Ready
If you’ve gotten this far into this article, you probably are seriously thinking about selling. But, when is the right time to sell? And, when should you go see your broker?
The answers are alarmingly simple. The best time to sell is when you are ready. The best time to see the broker is before you’re ready – about two years before!
Business owners sell for lifestyle reasons, when the going gets rough, when they run out of money and/or when a new opportunity beckons. Buyers buy for lifestyle reasons, when their previous occupation is no longer satisfying, when they are flush with money and/or when there are good businesses for sale that appeal uniquely to them.
There is no “season” or “ideal economy” for this: May is just as good as December and business sales occur in boom times as well as in recessions. Qualified buyers out-number sellers nationally (and in Maine) by about 3 to 1. So, many qualified buyers are always out there in every season, and in any economy.
Why go see your broker two years before? Because it can take that long to sell your business! Most businesses can sell much faster, of course, but not all. The time it takes you to choose a broker and get ready to sell might consume half of that time.
Even after you make a commitment to a broker, it will take the broker at least a month to write the offering memorandum (which we call an “Offering Summary”). It then can take many weeks and months of various kinds of specific efforts to confidentially find the right buyer. Long negotiations are normal and financing and closing takes time, too!
If You’re Not Selling, You’re Buying!
Business consultant Michael Gerber (“The E-Myth Revisited”) points out that every day each of us works in our business, if we’re not selling it to someone else, we’re buying it! Each day’s work is an investment of our time. What’s our time really worth? Is that time investment paying off? These are critical questions.
If this investment of our time in our business is paying off, we may not be ready to sell yet. If our business is making our life better (meeting our needs, generating an income and fueling our personal growth), it is a fantastic investment! By all means, we don’t want to give that up.
But, if instead, this investment of time we’re making in our business is taking the life we have (leaving us too little time to eat right, exercise and enjoy life, paying us too little income, and/or depriving us of the time we want to spend doing something else), it may be time to sell our business to someone else.
“Maine Business Brokers is needed around the world! You obviously know what you're doing.”
Annie Lau
Kuala Lumpur, Malaysia
