Toledo Legal News : Toledo Legal News - Article Selling a business is not as simple as posting a 'For Sale' sign in a window
RICK ADAMCZAK, Daily Reporter Staff Writer
Starting and then nurturing a successful business takes a lot of time and effort, but walking away from a business takes some work, too.
Whether it's because it's time to kick back and retire, move on to a new venture or simply cash in, selling a business has its own set of challenges.
Between preparing a business for sale, determining the right sale price or understanding tax ramifications, selling a business requires a good exit plan, even if that includes just keeping the place clean for visits by potential buyers.
"It's about education, education, education. You need to be educated on the sale process," said Emmet Apolinario, president of the Ohio Business Brokers Association. "If a seller decides to sell, the first thing I want them to do is find out information on how to sell the business."
But even before a business owner talks to a broker or attorney he has to figure out whether selling the business, and selling it now, is what he wants to do.
"When I first meet with a customer I try to understand 'Why do they want to sell?'" said Apolinario.
The recent recession has changed the approach many owners who have been considering selling their companies have taken.
"People are realizing they may not want to work more hours for the same money," said Apolinario.
Meanwhile, many Baby Boomer owners are inching closer to retirement or may be wanting to sell to perhaps start a second career or business.
A succession plan is another option. Owners may want to hand off their business to a son or daughter or for an employee buyout.
"There are many ways for an owner to exit the business," said Apolinario.
One of the first things a potential seller might do is find a business broker such as Apolinario, a professional whose livelihood is buying and selling companies, though brokers are not always needed to help sell a business.
Apolinario said he even has a tip sheet with helpful suggestions for people wanting to sell their businesses on their own.
Brokers can be found in a variety of listings and it's best to talk to several different ones and research them before choosing a broker.
Then there's the matter of determining a good sale price, a process that's as much art as science, Apolinario said.
A lot of it has to do with revenues and potential revenue earnings.
A company many not be making much money now, but if there's a good chance revenues will increase in the future, that can boost the sale price.
"There's a valuation process. Many industries have benchmarks that you can go by," said Apolinario.
Owners sometimes have an unrealistic idea of the value of their businesses, either too high or even too low.
"Many have a misconstrued value of their business, mostly higher but some lower," said Apolinario.
Some business owners get stuck in a "must sell" position where they perhaps are ill and can't run the business any more or maybe their business just isn't performing well financially. In either case the owner may have to settle for a lower price than hoped for.
A business owner must also have all of his financial ducks in a row.
Financial statements and tax returns need to be well organized by they time the owner is ready to sell since potential buyers will want to examine them.
"Intensive scrutiny of financials, physical inventories and even interviews with key employees may happen here. It's stressful, but you can survive due diligence," wrote James Laabs, author of the book The Business Sale System: Insider Secrets To Selling Any Small Business.
At the end of the process is the closing of the sale, which is not unlike the closing of a home sale where things can change at the last minute, so owners should be prepared for those changes.
Date Published: July 26, 2010
Copyright 2010, The Daily Reporter, 580 S. High St., Columbus, OH.
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