PPB September 2016

DON’T

tell everyone you are thinking

of selling your company.

If word

gets out that you are thinking

of selling your company it

can be bad for business. Keep

this very confidential matter

private. If you have a trusted

group of advisors, then it is

okay to share your plan and

gather feedback from that group

of people. Just be sure those

advisors understand and value

confidentiality as much as you

do. Further to this point,

don’t tell

your employees

. This is one of the

most common mistakes business

owners make. They think they

have an obligation to tell their

employees if the company

is for sale but they are doing

their employees a disservice.

Knowing the company is for

sale is meaningless unless the

employees can do something

productive with that information.

The truth is, it just causes

worry. If employees know the

company is for sale they can

get anxious and sometimes

even leave their jobs. It may

take years for the company to

sell and no one knows what the

buyer’s intentions will be with

employees. Do yourself and

your employees a favor and

keep it quiet until the purchase

documents are finalized.

prepare yourself for

candid financial

questions from

buyers.

If sales have decreased

over the past few years be

prepared to explain why. If your

margins have dropped a few

points make sure you understand

whether the decrease is due to

pricing or cost. The truth is the

only reason a buyer is looking

at your company is because

it might be a good financial

investment. Most buyers are

working on a 1 + 1 = 3 formula.

Your financial statements tell

buyers a story. Be sure it’s a story

you know well, and have the

data to back it up. Most buyers

will expect a full set of financial

statements including a balance

sheet and income statement for

three years. It is also helpful to

have interim statements or at

least interim sales numbers for

buyers to consider. If you don’t

have this information available

hire an outside accountant to

help you prepare it. Many owners

run personal expenses through

the company. Be sure to have

these carefully documented so

you can show buyers the true

earnings of your company. There

is no substitute for giving buyers

a solid financial picture of your

company and it is best to get

yourself in the habit of keeping

accurate monthly financials long

before it is time to sell. If buyers

see a well-run company with a

knowledgeable owner, they will

have more confidence and a

higher inclination to purchase it.

DON’T

assume your real estate will be

part of the deal.

Whether you

own or lease a building it is best

to be flexible with your facility

when the time comes to sell the

company. Buyers may or may not

need a building but the best way

to maximize the buyer pool is to

have the ability but not the need

to include it in the purchase. If

you purchased a building, you

have entered into the real estate

business and that investment

should stand on its own, which

means you should be able to sell

or lease it outside the company.

If you lease your building you

should not sign long-term leases,

especially as you get closer to

the time when you expect to sell

the company. Many owners take

pride in their beautiful facilities

but the truth for buyers is they

need to find ways to decrease

overhead, and consolidating

operations is the best way to

do that. Two rent or mortgage

checks dramatically reduces the

return on investment, which

reduces the amount buyers are

willing to pay for your business.

establish a

relationship

with an attorney

who understands your goals.

Attorneys can be valuable

assets when they understand

the long-term goals and work

according to those goals. Some

attorneys are deal makers; others

are deal breakers. Sometimes

attorneys can be rigid and focus

on the small picture. Others

work according to their own

timetable and cause unnecessary

delays. Some business owners

are scared of their attorneys and/

or the issues they are facing and

let their attorneys run the show.

An attorney works for you and

should work according to the

schedule you give him or her.

It may take some sifting to find

the right fit but once you find

that fit it will be well worth the

time. Always remember that

attorneys are there to give you

If buyers see

a well-run

company with a

knowledgeable

owner, they

will have more

confidence

and a higher

inclination to

purchase it.

If employees

know the

company is for

sale they can

get anxious and

sometimes even

leave their jobs.

It may take years

for the company

to sell and no one

knows what the

buyer’s intentions

will be with

employees.

SEPTEMBER 2016

THINK