You can guess my view of selling your business on your own without any advisors. It’s almost as bad as having the wrong advisors. Each of your advisors should have experience in buying and selling businesses. For example, if your tax pro only does 1040’s, they are not the right tax pro for advising you on selling your business. Ask the other members of your team if you’re short any of the following members.
· Tax Professional – This can be either an accountant or an attorney and might be a professional filling one of the other roles. This member will be responsible for advising the team on the best way to structure your deal to pay the least amount of taxes possible. The preferred way may not be possible for one or more reasons, so your Tax Pro needs to be creative and experienced enough to work with alternative structures when necessary.
· Accountant – This needs to be the person helping you with your books and preparing your financials. It’s better if this person is not an employee and better still if this person is a CPA. Most buyers expect or prefer to see your financials come from an outside CPA. This gives the buyer a more comfort that your financials have been prepared appropriately and accurately. Your buyer will generally attempt to project the future results of your business in his hands once he owns it. Your accountant will be very helpful in providing the buyer with information that will most accurately reflect your businesses potential. They will also help minimize and explain period over period distortions in your numbers that occur with any business.
The best type of accountant to assist you in buying your business is one with knowledge and experience in helping business owners build value in their business. Such accountants will help structure an engagement to identify areas where value can be added or increased. They can create a regular process to monitor improvements or lack of improvements with numbers to analyze and recommendations for improvement. If you can’t find such a CPA or you don’t want to change from your current one, adding a business coach is highly recommended (discussed below).
· Attorney – All agreements should be reviewed by the attorney on your team. This specifically includes the NDA, the Term Sheet, the Letter of Intent and all the closing documents including the Purchase Agreement. Further, your attorney should review the fee agreements with any of your other advisors other than existing your tax pro and your accountant. In particular, your attorney should review the agreement with the Business Broker if one is involved in your sale. His fee will be the biggest and the terms under which they will earn that big fee require review. Your attorney may be familiar with accounting, finance, tax, and valuations. Or not. It’s better if they are. But strong experience with negotiating and drafting the required documents is essential. It should also go without saying that a handshake deal is worth the paper it’s written on.
· Business Broker – Business brokers can add tremendous value to the team. The right broker can create a bid situation between multiple buyers (if you’re lucky and your business is highly desirable in an industry with many cash-rich buyers) and get you a great deal more than you can without one. They can also find a buyer for your business when your circumstances are difficult or unusual and buyers aren’t beating down your door. But that’s if they have the right skills, talent and experience. Not all business brokers do. So be careful to discuss whether or not to hire a business broker and which business broker to hire with your team of advisors before you hire one.
· Valuation Expert – This advisor is not required in every situation. With smaller transactions, an expert is typically not required because the price will be determined largely by factors not represented by the numbers. These factors also come into play in larger deals, but the greater stakes in larger deals require the financials support the price to a greater extent than in smaller deals. Either one of the other advisors will be trained and experienced with business valuations or your situation is such that the range of possible prices is somewhat narrow. But there may be terms or circumstances (providing healthcare services is one) where an expert is required. In such a case, the valuation they determine will be objective and based on seller and market information available to both sides – otherwise the opinion won’t be accepted by the buyer. The valuation can either help you or hurt you. Your team of advisors can help you minimize or explain problem areas.
· Business Coach – Business coaches provide objective advice on how to improve various aspects of your operations and processes. A business coach can add tremendous value depending on how ready your business is to sell. They are experts in the mechanics of running a business regardless of the industry or product or service. They can bring best practices to your attention that can improve your bottom line and increase your sale value. They can speed the time it takes to get your business ready to sell. Consult your team to see whether it makes sense to bring on one of these specialists. The right business coach can be a critical addition to your team especially when you cannot find the proper CPA or accountant to advise you on building value in your company. The best business coaches have multiple specific tools and techniques tailored for your business and industry that will keep you on track as you build your business towards your goal. The right business coach will earn their fees many, many times over. Ask your other advisors for recommendations.
· Other Advisors – Some business will require other advisors when a sale is underway. Some assets may require special expertise for their valuation. Environmental testing may be required for some real estate. Some businesses may require special regulatory compliance review. Your team can help you identify the rare occasions when such additional specialists are needed.
· You – You are a key member of your team. You should be involved in and make all the major decisions concerning your deal. You should understand which advisor is taking responsibility for what portions of the process that have been delegated. You should understand the strengths and weaknesses of each of your team members. You should ask your advisors questions, lots of questions. It’s also ok to ask what questions you’re supposed to ask.
· Key Employees – In general and as discussed above, you want to be careful about disclosing the sale of your business to your employees. They may quit or go to a competitor. Generally, it’s best to disclose transaction only after you’re fairly certain it’s going to close and you have a well thought out transition plan approved by the buyer. But there are some circumstances when the assistance of a very small number of very key employees is needed during Due Diligence. Consult with your advisors on how best to discuss the situation with these very key employees.
· Family, Friends, Neighbors, etc. – Certainly, you should involve your spouse. In most states, they have a legal interest in your business and will be greatly affected by life after the sale. But you should rarely discuss your sale with other family members. Let’s see… large amounts of money, close personal relationships. This combo can be quite combustible. If you discuss your sale with relatives at all, it should be very carefully, generally late in the process, and only if they have previously demonstrated sound judgment and experience with buying or selling a business. Ask anyone outside your team of advisors to hold the information of your sale in the strictest of confidence. Inadvertent disclosure can cause customers and employees to bolt and torpedo a potential buyer’s interest.
Assemble your team before you put your business up for sale, or as soon as you get your first inquiry about selling. Ideally, if you begin thinking about the future sale as you start out, you’ll take note of professionals along the way as you form your business and begin operations. You are looking for advisors with experience in buying and selling businesses. Your advisors can suggest other professionals to help fill out your team.
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Our Managing Attorney, John H. Walker, brings a unqiue skill to your legal matter. As a licensed attorney and experienced C.P.A., John has work with many businesses on buy-sell and complex tax matters. With this expertise, Walker Law P.C. deal attorneys can spot issues that most attorneys won't until it's too late.
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