The First Steps

Let's assume that you have decided to at least take the first few steps to actually selling your business. Before you even think about placing your business for sale there are some things you should do first. The first thing you have to do is to gather information about the business.

Here's a checklist of the items you should get together:

* Three years profit and loss statements
* Federal Income Tax returns for the business
* List of fixtures and equipment
* The lease and lease-related documents
* A list of the loans against the business (amounts and payment schedule)
* Copies of any equipment leases
* A copy of the franchise agreement, if applicable
* An approximate amount of the inventory on hand, if applicable
* The names of any outside advisors

What Do Buyers Want to Know?

This may be a bit premature since you may not have decided to sell, but it may help in your decision making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked - and, should be prepared to answer:

* How much money is required to buy the business?
* What is the annual increase in sales?
* How much is the inventory?
* What is the debt?
* Will the seller train and stay on for a while?
* What makes the business different/special/unique?
* What further defines the product or service? Bid work? Repeat business?
* What can be done to grow the business?
* What can the buyer do to add value?
* What is the profit picture in bad times as well as good?

Buyers Want Cash Flow

The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, as well as owner or family compensation.They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.

Appearances Do Count

The time to replace that old worn-out piece of equipment is before you decide to sell. Don't assume that a new owner will want to do it or that the price will be slightly lower because you haven't replaced it. The time to "spiff up" the business is now, even if you aren't selling. Fix the sign, replace the carpet, paint the place - make it look good. Even if you're not selling, it's just plain good for business, and you never know when the time to sell occurs. Keep-in-mind that anything that increases sales also increases profits and the all-important cash flow!


Eliminate the Surprises

Long before you put your business on the market eliminate the surprises! Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises - most of all potential buyers. Whether legal, accounting, environmental, or anything else - solve it now.

Please review Business Owner FAQ's

Call us at 516-942-3588 or send us e-mail