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Four tips for selling your business

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Selling their business is the most popular exit strategy for business owners, and selling a business should be a business owner’s finest hour. Following these four tips will help you sell your business on the best terms possible.

1. Sell at the right time

Timing is critical to a successful sale. However, selling at the right time is much easier said than done. A great time to sell a business is when new products are performing well and profits are growing. This allows owners to present defensible projections for continued business growth, while leaving open the possibility of walking away if the buyer does not meet the seller’s terms. Sophisticated buyers know that the best time to buy a business is often when a business owner is desperate to sell. Remember that it is better to sell your business a year too soon, rather than a year too late.

2. Don’t become too emotionally committed

It is important to maintain objectivity and the willingness to walk away from a transaction, if the criteria for your business sale cannot be achieved. After the sales process has begun, many business owners become too emotionally attached to the idea of selling their business and become susceptible to accepting a bad deal.

A good way to maintain objectivity is to determine what you consider an acceptable price and appropriate terms and conditions before your business is offered for sale. Then, do not agree to anything less. Additionally, spend time mapping the course of action that you will take should the sale not be completed. Be prepared to follow that path, if needed.

3. Create competition

In selling a business, you increase your chances of getting a favorable price by having competing buyers in play. A common mistake business owners make is talking to just one potential buyer at a time. If a potential buyer believes that the sale of your company is not a competitive proposition, then they will offer the lowest price they believe that you will accept, as opposed to the price they believe they must pay to beat the other suitors. Also, potential buyers may be motivated to keep your business out of the hands of its competitors, and therefore, be willing to pay a premium to do so.

4. Be prepared

Well before entertaining a sale, business owners should ensure that all documents, financial records and information that a buyer will reasonably want to see during their due diligence are available, accurate and current.

Having everything ready for the potential buyer’s team to review affirms the buyer’s enthusiasm for the acquisition. Not being prepared raises concerns for your potential buyer, may cause them to second guess their desire to acquire your business, delays the acquisition process and opens the door for buyers to renegotiate deal terms.

-Submitted by Michael Brown, partner in Stradling Yocca’s corporate and securities group, with extensive experience in buying and selling middle-market companies.

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