If you are like most business owners, you have thought about selling your business a time or two. It’s perfectly normal to dream and wonder what it would be like to be free of all the trappings, headaches, and burdens of running your company. You probably also wonder how cumbersome the sale process might be and what it entails.

While we can’t tell you what your imagination comes up with at the thought of freedom, we can tell you that selling your business requires a substantial commitment and should be a calculated decision. As with most endeavors, whatever you put into the process is what you will get out of it.

A fundamental element to a successful sale is preparation. Knowing what to expect, understanding the motives of your most probable buyer, anticipating their questions, and vetting potential problem areas of your business that might inhibit or delay an eventual sale are key to a sound selling experience. Once you feel comfortable with these basics you just might stop wondering and take the leap necessary to begin living that dream.

The selling process has three distinct phases and should always be performed within the confines of Confidentiality. The anonymity of your business is critical during the sale process and is important to protecting your interests. National statistics indicate that the majority of businesses sell within four to nine months.

PHASE 1 – Message

Before this phase begins, a valuation of the business would already have been performed. A valuation provides an objective price range that you can anticipate in the marketplace. Gathering the information for a valuation is not complicated or overbearing. Typically, the documents required to determine the probable price range of a company are tax returns for the most recent three to five years, a current year profit loss statement, current balance sheet, and an equipment list. Several years of financials helps paint a financial picture and current trend of the company. Knowing the value of the business also helps determine the most probable buyer, whether it be an individual, a strategic buyer, or a financial buyer,

During this initial phase the business profile is compiled. It encompasses the detailed analysis and assessment of the business for the purpose of packaging and communicating its value, its market, its assets, its strengths, its areas that can be improved (growth potential), and its financial history. The resulting profile is the Message that will introduce your business to the marketplace of appropriate buyers using a systematic methodology that protects the confidentiality of your business.

PHASE 2 – Action

This is the go phase where the business is launched into the marketplace. During this stage a rush of behind-the-scenes Action is taking place. Prospective buyers will be interviewed, confidentiality agreements will be signed, questions will be answered, and meetings will be arranged. The seller must continue to run the daily operations of the business and carry on as usual. Deviating attention away from day-to-day demands of business operations would affect employees, clients, sales, and ultimately profits — which can mean a lower price in the marketplace.

PHASE 3 – Profit Point (Pay Day)

This is the final stretch, the closing phase of the process. It commences once a Letter of Intent or Earnest Money Contract is in place, after an offer has been made and accepted.

The first step in this stage is due diligence, which is an investigation or audit of the business by the buyer. Due diligence serves to confirm all material facts in regards to the potential sale. This includes reviewing all financial records plus anything else deemed material to the sale. Sellers could also perform a due diligence analysis on the buyer. Items that may be considered are the buyer’s ability to purchase, as well as other items that would affect the purchased entity or the seller after the sale has been completed. This is especially important if the seller is financing part of the deal.

After due diligence is performed and both parties are satisfied with the results, closing activities begin. A sample of some activities that are likely to take place during this closing phase are: