Preparation for putting a business on the market is like rehearsing for a stage performance….as the main character….in the spotlight.

When entering the center stage spotlight, both a business owner and a star performer must know their roles, the script, the story, as well as the other major players and the roles they will play. The goal of both are to achieve a certain response for their portrayal of the story from their own specific audience. Whether it be rave reviews for the actor or offers to buy the business for the owner, an experienced director is key to making the presentation a success.

Putting metaphoric pros aside, directing and orchestrating the behind-the-scenes activity for the successful sale of a company, is a business brokerage firm.

The Business Owner’s Role in a Sale

Before dressing up the company for its debut, be ready to share its best features, as well as its blemishes. All will become visible under the due diligence spotlight. As in the classic tale, “The Emperor’s New Clothes,” the stuff the business is made of will be evident. Buyers don’t like surprises, and neither do business brokers or other members of the professional team involved in the sale process. Problems uncovered late impugn your integrity and threaten the price–and the deal. The more issues brought to the table and worked out in advance, the better chance of a smooth closing.

Your role as the business owner is to be the source of information necessary to accurately assess the firm. Addressing the following issues will help maximize the value of a company, provide transparency to prospective buyers, and minimize the amount of time consumed in the sale process. This information will be the foundation of the script that will tell the story to your audience…the markeplace of buyers.

• Why is the business on the market? This is not only important from the buyer’s prospective, but an owner must have a sincere motivation to facilitate a smooth process.
• Are accounting procedures in place and easy to follow?
• Are profit and loss and balance sheets well prepared and clean?
• Are the facilities and equipment in good working condition? “Curb Appeal” makes an impression. When someone walks into a business establishment, they’re looking at everything. An orderly and organized facility gives a good feel for how the business is run.
• Is intellectual property (if applicable) well documented and up to date?
• Is there an appropriate lease in place and is it transferable?
• Are customer contracts secure and transferable?
• Are their employee contracts, are they well documented?
• Are operating procedures documented and in use?
• Are there outstanding legal or financial aspects that may hinder the sale?
• How is the business positioned in relation to the competition?
• What distinguishes the business from others in the same field?
• What services or products are offered that are unique?
• What niche is served?
• Are there areas for future growth?
• What makes the company’s customer service superior?

The Story

Once information gathering is complete and data is analyzed, a price range will be determined and a company profile will be formulated. This is the story about your business. It will be the marketing tool that articulates and presents the message about your company to the audience of buyers.

The Script

The script is made up of the individual pieces that tell the story. The following are individual items that will be pieced together by the prospective buyer in order to substantiate the story and justify the asking price.

• Financial statements. Accurate financial statements not only adds to a buyer’s comfort level, it more likely will result in a higher sales price. A potential buyer is typically looking for a predictable cash flow from the business. Three, four or five years of professionally prepared financial statements and tax returns will show them that.
• Trends in accounts receivable and payables. When selling a business, you want to show that you have good customers who pay on time. Owners need to be on the ball and contacting slow-paying clients. This shows better credit management, follow-up and attention to detail. Seasonality of cash flow and concentration of the customer base are also underlying themes of the story.
• Make sure patents, trademarks and other property rights are properly registered. Review contracts for third-party consents needed in order to facilitate a transfer. An example would be a construction subcontracting firm that has a contract with a home builder to provide doors and windows for an additional number of houses. That contract needs to be reviewed to see if it can be transferred or if it requires the consent of the home builder.
• Well-organized and updated collateral materials such as employee handbooks, policy manuals, mission statements, or an online Internet presence add value in the eyes of the purchaser. Other collateral such as brochures, press releases, advertisements, and marketing campaigns such as mail out or email programs add credence to the story.
• A list of furniture, fixtures and equipment along with applicable service records shows the buyer that the company is well maintained. Remove excluded items prior to the sale, or list items excluded from the deal separately.
• Being prepared for the questions the buyers will ask, will facilitate a smooth process for all involved.

The Players

The team that a business owner puts together to assist in the structuring of the business sale will play key roles in the transaction. Depending on the size and complexity of the business, the usual team may consist of the firm’s accountant, attorney, and business broker. In order to insure a smooth process, it is recommended that all team members be experienced in business transfer transactions.

The Successful Performance

Proper rehearsal and having the necessary props in place for presenting a business to the targeted audience is key to attaining the desired outcome…….the successful sale of the business in a timely manner……..a rewarding finish to a performance well done……..the whole reason for the show.