The purchase and sale of a business is, for most people, the largest single financial transaction they will ever complete.  The seller is frequently passing on to a stranger the result of his life’s work, and they usually expect the proceeds of the sale to take care of their retirement or to fund some other endeavor.

The buyer, on the other hand, is usually investing a substantial part of his liquid assets, and frequently is obligating himself to substantial loans to the seller, a financial institution, or both.

Therefore, it is not surprising that buyers and sellers are nervous in this high stakes situation at which most of them have little or no experience.

In this situation, our best advice to you is to stay calm.  You may not have experience in selling businesses, but Acquisitions Unlimited does.  More importantly, the good judgment and common sense that made you a successful businessperson will see you successfully through the sale of your business.

In order to ensure that the sale of your business goes as smoothly as possible… we would like to share with you some of the do’s and don’ts in selling a business that we have learned through experience over the years.  Ignoring these tips can cause anything from minor problems to the failure of a business to sell.  The sale of your business will go much more quickly, smoothly and successfully if you keep these points in mind.

The following list is not in order of importance.  In any given situation, one or more of them can be important.

R    Do be flexible and keep an open mind.  The sale of a business encompasses many factors: price, down payment, interest rate, term of notes, future involvement of the seller financing, relationships with suppliers and customers, etc.  Don’t take an adamant stand on any one item.  Look at the whole picture.  Selling a business should not be a battle of wills.

We are not suggesting that you accept a “bad” deal.  We are suggesting that your best interests are served by working with us to negotiate a good offer.  Frequently, you can “give in” on an area of minor importance, and “get in” on an area of major importance to you.

Q    Don’t surprise anyone with undisclosed problems.  Surprises kill deals.  All businesses have problems.  There is no such thing as a perfect business.  Tell Acquisitions Unlimited up front about all current or past problems with your business, i.e. lower than expected sales or profits, loss of a major customer, lawsuits, having been in Chapter 11, etc.  Do not try to minimize them or pretend they do not exist.  This will enable us to explain them in their best light to a prospective buyer.

Almost anything can be explained satisfactorily to a buyer if they are told about it early on.  Having a buyer discover a problem at the last minute can kill a sale.  No one wants to buy a business from someone who has misled them either through ignorance or avarice.  Honesty is always the best policy.

R    Do continue to operate your business as if it were not for sale.  Since Acquisitions Unlimited only represents good businesses, we are generally successful in selling most of our client’s businesses.  However, while we are marketing your business it is not the time to “rest on your oars.”  You owe it to your employees, your customers, and most of all to yourself, to continue to purchase needed equipment and inventory, seek out new customers, etc.

If a buyer finds out about a sudden loss of sales, or the inability to grow the business because of insufficient inventory or equipment, he can lose interest in the business very quickly.

Q    Don’t try too hard to impress a prospective Buyer.  Just be yourself.  Occasionally, owners act as if they have all the answers and let it be known that they are doing the best possible job of running their business.  This may help our ego, but it does not help the sale of your business.  If you are so good that you are irreplaceable, your business is probably unsaleable.  What buyers would want to try to follow such a tough act?  All buyers want to see potential for them to grow the business.

We don’t mean that you should be too humble … you have a right to be proud of your success.  Just don’t convince the buyer that he can’t measure up to your standards.  If you do, he will probably purchase someone else’s business … one that a mere mortal can run.

R    Do be careful what you say to a prospective Buyer.  Feel free to discuss any aspect of the operation of your business.  However, do not discuss the purchase price, down payment, etc.  You do not want to negotiate a sale prematurely.  If a buyer asks you about these items, refer him to Acquisitions Unlimited.

Try to avoid a detailed discussion of the financial statements of the company.  It is likely that you will quote some details inaccurately in an impromptu discussion.  These details will probably be remembered at a later date and may cause problems.  Again, refer the buyer to Acquisitions Unlimited.

R    Do minimize your exposure to a prospective buyer.  Once you have accepted an Offer to Purchase, try to minimize further contact with the buyer until closing.  You, or one of your employees, may inadvertently say or do something that “turns the buyer off.”  Think about that.  You already have a deal.  All it has to do is close.  It can’t get any better than that.  Any changes are likely to be to your disadvantage.

You must be careful not to give the impression of being aloof or trying to hide something.  However, the buyer does not have to work in the business prior to the closing to see if he likes it.  You have nothing to gain and potentially everything to lose by being “chummy” with a buyer prior to closing.  Remember, a sale is not completed until it is closed.

Q    Don’t tell your employees the business is for sale.  Most business people are, by nature, honest and straightforward people.  Because of this, frequently they feel they should tell their key employees the business is for sale.  This is a mistake.  Again, you have nothing to gain and potentially something to lose.

People fear the unknown.  A key employee may look for another job, or accept an offer he may otherwise have turned down if he finds out the business is for sale.  This is not fair to you or to the buyer.  You do not want to lose a valuable employee – and neither does the buyer.  After all, he is paying you a good price for your business because, among other things, you have key employees in place.  The loss of one of these may jeopardize the sale.

The right time to tell the employees is after the closing.  Then, you can introduce the buyer to the employees and tell them something like: “This is Mr. Davis.  He has just purchased the company.  However, I am going to be around for a while and things are only going to be bigger and better.”  This removes the fear of the unknown.  Your employees will also be favorably impressed with the same qualities of the buyer that induced you to sell your business to him.

R    Do beware of “Seller’s Remorse.”  You should know in advance that there is a good chance that prior to closing you will wonder if you are doing the right thing.  This is perfectly normal.  After all, your business has probably been a major part of your life for a number of years.  Selling it is almost like losing a member of the family.

Unfortunately, the acquaintances you talk to about this are usually not much help.  You will probably hear many horror stories and be told that you did not get enough money for your business, etc.  In many cases, your golfing buddy or next door neighbor is not qualified to make these judgments – but that will

Jan Fowler owns Acquisitions-Unlimited, Inc., a Florida based Mergers & Acquisitions, business intermediary firm.   She has been involved in the sale of over 200 different businesses.   If you are considering selling a business, see www.acquisitions-unlimited.com.

Tip two:
Do some research on the type of business you would enjoy running. When you acquire a business, you are purchasing a job. So it is important to find out what is involved in running a business in that industry. Restaurants, bars and convenience stores involve long hours. Will the business require special skills or licenses that you have to qualify for, or a waiting period to take the test for that license?
Are you willing to invest the time and money to make the business successful? I once sold a business where part of the owner’s job was to market. The business contacts were made visiting existing and acquiring new clients on weekends. The new owner purchased the business and became upset that the clients were not calling him. When asked if he was marketing to the clients, he stated that he wasn’t going to work on weekends.

Tip Three:
Get as much information on the business up front. Request copies of at least three years tax returns and current profit and loss statements and, if you are not comfortable reviewing them, have your CPA look them over. If you don’t have CPA, now is the time to hire one. You will need an accountant or CPA for the new business.

Tip Four:
Ask for an equipment list from the Seller. If you are purchasing the property, ask for a site plan and see if the owner has a recent appraisal of the real estate. If the business is leasing the property, ask for a copy of the lease. Check the terms as to what is covered, the length of the lease. Does it contain options to renew? You don’t want to be forced to relocate the business in the near future because the lease expires. And find out what is prohibited by the landlord. You may think that a large new sign is what the business needs, but the landlord does not want it on the property.

Tip Five:
Check the local ordinances as what activities the business can and cannot engage in. Perhaps you want to buy a restaurant and what to add live music at night. The local laws may contain a noise ordinance that would prohibit having a band.

Tip Six:
Where do you find businesses for sale? You could check the newspaper classifieds, though the businesses for sale column is thinner than it used to be just five years ago, there are still businesses listed there.
Now businesses for sale tend to be listed on the internet, with websites like BizBuySell.com, BusinessNation.com, BusinessesforSale.com, Acquisitions-Unlimited.com and BusinessForSaleFlorida.biz.
Network with people who own businesses in the industry which you are considering. Getting to know other business owners is good idea. They will be a source of information.

Tip Seven:
Your best resource is a professional business broker. In many states a real estate license is required to sell businesses, but a business broker is trained to sell businesses, not homes. Many professional business brokers belong to trade associations, like the International Business Brokers Association and Business Brokers of Florida. These associations provide training in the field of business brokerage and mergers and acquisitions.
Business brokers are in contact with business owners and, because of this, know when the owner is considering selling his business, but does not want to advertise it on the open market.
When working with a broker, he or she will attempt to pre-qualify a buyer by asking a series of questions. These questions will include what kind of business are you looking for and, what type of business would you be interested in operating. Another question is how much money does the business need to generate after expenses (also known as cash flow to owner) for you to live comfortably. This leads to the broker’s the next question.
“How much money would you like to invest in a business?” This is a polite way of asking; “How much money do you have?” The wrong answer is; “As much as it takes.” Or; “It depends on the business.” Unless you are Warren Buffet, it doesn’t depend on the business. If you as rich as Warren Buffet or Bill Gates tell the broker up front, if not state that monetary limit.
The broker will be spending time searching for a business in your chosen industry, within your price range, and with the desired cash flow, but can only efficiently help you if he knows your down payment comfort level.
Brokers prepare business profiles on the businesses that they have listed and, theses profiles include the information listed in tips three, four and five. So you don’t have to search for this information. Let me say, however, that there are cash businesses.
Business brokers have contacts that make the acquisition process smoother than attempting the process solo. These contacts include attorneys that specialize in business closings. Since these attorneys are involved in closings on a daily basis, they have the forms prepared and the staff can quickly prepare the necessary documents. This results in the procedure being done correctly and often with a cost savings.
Business brokers have contacts in the lending industry. I don’t know how many times I have heard a buyer saying; “I’m going to get a loan to purchase the business.” It is very rare that a conventional bank will loan money to purchase a business. And I have heard of only one that loaned on a distribution company. The Small Business Administration (SBA) guarantees loans and some businesses qualify. There are SBA mortgage brokers and the business broker works with these contacts to secure you a loan, if the business qualifies.
Business brokers have the necessary forms to prepare an Asset Purchase Agreement. These forms are created from experience and, oftentimes standardized by the associations to which the broker belongs. The Asset Purchase Agreement is the most important and it incorporates the due diligence issues and other contingencies that protect the buyer.
Owning your business allows you to gain more control of your destiny. Small businesses employ the vast majority of Americans, even more than the large corporations. A business becomes like a child that you grow. I wish you luck in finding that business that may not be perfect now, but through your ingenuity, hard work and brilliant ideas you can create the perfect business.