Stop Lights in the Fast Lane James R. Brennan, FACHE, Long Island, NY
A primer for the business owner when considering the sale of their business.
Selling a business is not a trivial task. Many speed bumps can be eliminated or minimized with some attention and advanced planning. At all costs, you should avoid waiting for the closing table to learn that your business had some "issues" that will disinterest the buyer, reduce multiples or increase discounts and adjustments.
In the sections below, you will find a collection of items to address to ensure that green lights are glowing through the finish line. Arguably, each section merits an entire chapter in a book, however, for the busy executive, here are some of the highlights.
Start early
Obtain shareholder consensus
Maintain focus on the current business-don't take your eye off the ball
Human resources-clean up any employment related issues
Facilities-does your building or office have curb appeal?
Production/manufacturing-clean up any product warranty issues
Taxation-are you current on all taxes?
Finance-are your loans assumable? Are your financial statements automated, reviewed, audited?
Legal-are there any skeletons in the closets that you should handle prior to starting the start of the due diligence (DD) process?
Sales-review current contracts and organize your sales pipeline list
Customers-call your customers proactively to ensure that all is well
Valuation-have your advisors create a valuation using comps, an in-depth evaluation of the business fundamentals, market conditions, strategic positioning, etc.
Strategic plan-is your strategic or business plan up-to-date?
Health-review the health and age of the owner(s) and don't wait until any potential health issue is escalating before considering the sale of the business.
Competition-review your competition and their potential actions once educated about your deal
What's your exit strategy?-work with your TAB facilitators and the TAB SBL framework to design your own exit
The inner circle-decide who needs to know about the possible sale
Team negotiations-review your acquisition team and make sure that its stacked with experienced M&A team members
Buyer targeting-work with your team to create a target list of perfect buyers (green), unknown buyers (yellow), and nightmare buyers (red)
Are you ready?-once you start the process, you must be committed, available and responsive to the volume of requests from any potential buyer