Deciding to sell
Deciding to sell your business is an emotional decision. Once you think about selling then it is time to make the move – assuming all decision makers are on board with this decision. Once you decide that you want to sell then make the move. Once you think about selling then you are already making an emotional move toward selling. Preparing your business sale is important if you want top dollars transaction.
Books and Records are Important
The first area to understand is that books and records are important. A business needs to be able to justify a price through tax returns, equipment values and inventory values. A pure “cash business” with no substantiating data is very difficult to sell. But in these “cash business” situations where the actual cash flow and declared cash flow are different, there are still ways to prove the entire cash flow through a second “book” or receipts.
The second area to understand is that you should keep the business running as is and NEVER tell anyone that you are selling. Any hint or leak that you are selling could be catastrophic to the business and the businesses’ future. Employees and customers are very good at noticing changes that may indicate a business is for sale. This will have a devastating result on the business.
Once the decision has been made to sell, you have to prepare various facets of your business before taking the step toward selling as part of ‘Preparing Your Business for Sale’.
Here is a general list that you need to prepare…
- Up to 3 years of tax returns – including P&L statements, if available
- Equipment list & value of equipment at replacement cost
- Value of inventory at your cost (not retail)
- Value of real property (if included in the sale)
- Copy of the lease if business is on leased real property
Here is what you DO NOT want to do…
- Tell anyone that you are going to sell – confidentiality is of utmost importance
- Change the business models or daily operations
- Take cash out of the business that will alter subsequent financial statements