Seven Tips To Help You Get the Most Money in the
Shortest Period of Time

1. Set a realistic time frame – It takes time to sell your business right. In a recent survey (February 2008) conducted by the listing web site Businesses for Sale, 62% of the business brokers responding stated that it took them nine months or more from listing to sale. Only 28% reported that it took six months or less from listing to sale. The most important factor affecting how long it will take is “asking price”. The higher the price, the longer it will take. The second most important factor is “Terms.” The better the terms, the faster it will sell. Rolling out of bed one morning and deciding it is time to sell, and picking a number out of thin air, can set you up for a very frustrating experience. An approach like that will most likely impact how much you get for your business and will quite certainly spike your blood pressure during what will be a chaotic process.

2. Maximize cash flow – The first thing a Buyer will ask when looking at your business is, “How much can I make if I buy your business?” The Buyer doesn’t care how much you paid for it or what you have invested. All he or she cares about is how much he/she will have left over at the end of each month to pay the mortgage and feed the kids. So you have considerable influence over your company’s market value. If you have been minimizing profits to limit your tax liability (which most small business owners do), many brokers recommend eliminating such discretionary purchases as buying a new expensive car, installing that new computer system, writing off a vacation to Hawaii or paying the golf club dues during the year before you plan to sell. Since your business will sell for 2 to 4 times cash flow, every dollar in additional profit will mean 2 to 4 dollars in additional sales proceeds.

3. Maintain clean and consistent financial statements – Many small business owners manage their businesses with their check books. If there is money left over at the end of the month, they think they are profitable. Buyers are very sophisticated, they have advisors, and they will only buy a business that has consistent credible records, including Profit and Loss Statements that can be reconciled with Tax returns. A CPA who is looking at a deal for a buyer is sure to kill it if he or she can’t understand the books. Any bank looking at the deal with the idea of providing an SBA loan will require three years of P&Ls and tax returns. Have this stuff ready before you go to market with your company.

4. Choose the right broker – Ask your circle of friends and business associates if they can recommend a broker with whom they have had a positive experience. If that doesn’t produce results, contact the IBBA (International Business Brokers Association) for a list of brokers in your area, pick a few and interview them. Once you have screened them for experience, competence and process, you might ask for a reference. Most of all, choose a broker with whom you feel you can develop a relationship of trust. You will entrust one of your most important assets to this person for a considerable period of time.

 5. Determine how much your company is worth – The best way to determine how much your business is worth is to hire a business appraiser. This is a disinterested party with mountains of data and experience – not your CPA or Lawyer who may be inclined to tell you what you want to hear. These appraisals are not expensive (less than $1,500) and are well worth the investment. Your broker can also give you an “Opinion of Value”, but be careful – brokers who are interested in retaining you as a client may not be objective either. Remember this simple equation in valuing your business. It must provide sufficient cash flow to provide the buyer a decent living, retire any debt he/she incurs in the purchase and leaves a little left over for a rainy day.

6. Set realistic expectations – This is key to a successful sale. Without realistic expectations you run the risk of passing on an excellent offer just because it did not meet your expectations. And on the flip side, you might agree to sell your business for less than it is worth.

7. Understand Buyers and the process – Ed Pendarvis, the founder of the Sunbelt Business Brokers Network, describes Buyers best with his 90% Rules. Here are some things to remember:

          a. 90% of Buyers are first time Buyers. They are not risk takers. They are not just investors.

          b. 90% of Buyers will have to finance the purchase.

          c. 90% of Buyers will have to get the Sellers to finance part of the purchase price.

          d. 90% of Buyers have from $15,000 to $60,000 that they are willing to risk by investing in a business. They may have net worth in           a house or 401(K), but normally will not risk those assets to buy a business.

          e. 90% of Buyers come out of middle management with a company and are used to making from $45,000 to $95,000 per           year.

Regarding the process, 80% of all Buyers that buy a business found it advertised on the internet and 20% come from referrals.

The selling of any business can often be an emotional and chaotic process. Pay attention to these 7 tips, and you and your Buyer will both walk away from the closing feeling the sale was a win/win proposition.