The Ten Commandments to Selling Your Business



Selling a business can be a complicated transaction fraught with dangers – no matter the size. It can collapse at any moment. Following these “Ten Commandments” will help you keep things on track.

1.  Engage a trusted, experienced, capable intermediary. You don’t know what you don’t know, so having a trusted, experienced intermediary who can blend negotiating with confidentiality and a knowledge of these transactions as well as both parties is time and money well spent.

2.  Place a reasonable price on your business. This is the hardest thing for sellers who nearly always overvalue their business in the hope of securing a great price. Remember that you want a win-win transaction and the best price is a “fair price.” Will assets, cash flow, gross revenue, growth, and other factors determine the value of your offering?

3.  Carry on your business as usual. Don’t obsess so much with your sales transaction that you neglect the day-to-day details and demands of your business. If you do, you put your sales, costs, profits, and assets all at greater risk.

4.  Prepare for the sale of your business well in advance. Ideally, you begin an exit strategy the first day of your business. With the help of your intermediary, you can develop a portfolio or business resume to have ready for qualified buyers as well as begin “a housecleaning” in addition to the literal “sprucing up” of your assets, accounts or facilities.

5.  Anticipate what information your buyers and their financing resources will require. This can include appraisal of assets, three years of tax returns, and your most recent financial statements for starters.

6.  Be flexible in your seller’s demands. Don’t be the kind of seller that flatly requires this or that, all-cash at closing or no contingent payments for example. Consider taking back seller-financing. There are financing and tax implications with any of this that affect not only you, but the buyer as well and your trusted intermediary or advisors may have knowledge or strategies you should consider.

7. Put your ego aside and negotiate, don’t dominate. Sure, you are used to being your own boss,but be prepared to observe, listen to, and learn from your prospective buyer. Work with your advisors on which issues are worth fighting for and the ones to bend or fold on.

8.  Price sensibly and leverage through buyer competition. Assuming you have either a healthy business or a promising turnaround (and make sure you correctly assess which one applies to you), as in real estate, a properly priced offering will outperform a more highly priced offering simply by getting several buyers competing with one another. If the business is priced too highly and there is a lack of interest, potential buyers will assume that there are problems or the ones associated with it or its industry may be greater than they really are.

9.  Keep things moving. Keep the momentum of the deal moving along. Don’t let time drag the deal down. Be ready and available to meet, be prepared for meetings, questions, and follow-up, and stay on a timely schedule that moves along in a reasonably timely fashion.

10.  Be willing to stay involved. Don’t let burnout or your desire to move on sour any sale. Your continued involvement in the business after the sale if requested can be a huge selling and negotiating point in your favor. Besides you should be positioned as the one individual that can help the most. Be available if requested.

Be smart, be reasonable, and realize that selling your business may be the single most important financial transaction in your life. It’s not the time for a do-it-yourself project in which you dictate all the terms. Solicit and encourage experienced, competent counsel.

Bob Fagan, in addition to be a writer and coach, is an accomplished business consultant experienced in building, leading, and selling businesses valued up to $2 billion. 

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