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So, you have decided to sell your business, now what?
Part 3 - Tips: Do's and Don'ts for the Seller
In the final installment of our 3-part series, let's now discuss some points of Do's and Don'ts about selling your business. I'm going to combine a couple of the key areas to be covered such as - the information "package", marketing the sale, using advisors, and dealing with buyers -- all the way through Due Diligence. (I'm saving the discussion of that point- forward, though, for the final part of this series.)
To make this section a bit more fun, I'm going to bullet point all of the items and provide a little detail behind each, though most are self explanatory. This should make for fast and furious reading; though this is the information age, if you're like me you're too often bombarded with "information" to read. I've tried, here, to provide the most complete list without boring side notes.
Ok, the Do's first:
- Do have as much information on your business, market and comps as you can possibly have (the more you don't have the more you leave it up to the buyer to fill in the blanks and trust me that never works in the seller's favor).
- Do plan on the sales process to take some time (3-6 months is pretty common but it can be much longer, of course).
- Do continue to run your business as though you were not selling it at all!! (I've mentioned this before but it needs to be said again and again).
- Do plan on giving a lot of private and intellectual information away (this is a double-edged sword of course - the less you give the less you can expect from the buyer but the more you give the more you expose yourself so how you do this takes experience and skill).
- Do protect yourself though with NDA's (Non Disclosure Agreements).
- Do ask any potential buyers if they are serious about the purchase and if they have the money to purchase should all move forward. Sounds simple enough but guess how often a seller will actually ask that question directly. It is your right to do so and is your prerogative to not discuss or share information with anyone you do not want to. Let no one tell you differently.
- Do research other similar businesses for sale/that have sold, if you can (this is not always easy, especially with Tech/Internet businesses).
- Do expect to sign a Letter of Intent, Non-Compete (NCC), Purchase & Sale (P&S), Bill of Sale and possibly a Promissory Note as well (more or less depending on the deal size, parties involved the States of each involved also).
- Do speak with an Attorney and a CPA before you sell/begin to sell so that you are prepared when you need to be (and most likely you will need them).
- Depending on the size of your business and the party buying your business the hours needed for each will vary greatly. I suggest doing what you can though so at the very least you are not beholden to someone else and remember this is your deal not theirs - too often attorneys and accountants forget that, from my experience.
- Do review and consider speaking with a business broker. Don't consider just any - review and research first then speak with a few and then determine to use one or not. You will probably get some good free advice regardless, which doesn't hurt.
- And finally, Do put a plan of attack together for the sale and close -- but also expect that plan to change (probably more than once) and be open to ideas.
Ok and now the Don'ts:
- Don't lead with sketchy or incomplete information - after that you'll play catch up the entire time and will most likely lose trust for good… and then lose that buyer (and they may have been the best match!).
- Don't assume you will sell your business fast, for all cash and for 'full price'. Plan on being flexible somewhere and also plan on a lot of negotiating.
- Don't believe your own hype. Telling a buyer this business "could be Millions" in revenue or how "much promise" there is, etc. is just that - promise. Most buyers today will not pay for promise (save the Google IPO!).
- Don't believe every piece of information you have/know is "gold" and can't be shared. I wish I had a dollar for every time I have been asked to sign a NDA before reviewing a business only to then see how it is no different than 100 other businesses out there.
- However, Don't share anything that truly is "gold" until you have a serious buyer that can buy, has signed an NDA, and is moving forward (such items might be: actual programming code, vendor names, etc.).
- Don't waste your time with buyers that waste yours. Period.
- Don't assume you can handle all facets of the sale (legal, accounting, etc.) by yourself. The money you spend on that could save/make you 10 times that much.
- Don't turn over the "keys" until you have all in writing and a deposit on hand (you could hold the domain or put some of the assets into escrow along with the buyers money is the safest bet for any truly unsure situations).
- Don't flood the market with your own rip-off businesses - sell one and only one in the same space.
- Don't complain about or even negotiate the Non-Compete (NCC) unless it is very vague. I recommend specific -- but longer -- versions, and being upfront about your willingness to do so. That will show a lot.
- And finally, Don't expect everything to go as planned, for the plan will change without a doubt!
I hope that you find most of these self explanatory, however, should you need further explanations on anything above or simply would like to review more specifically, my email is always on and I welcome any and all.
About the Author:
Ross Whittaker is a Managing Partner at eBizBrokers, Inc., a specialty e-business brokerage firm located in Waltham, MA.
For further inquiries or questions, please contact rossw@ebizbrokers.com.
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