Top 5 Things to Consider When Selling Your Business

In this article, we are to talk to you about five things to consider when selling a business from an operator's perspective. I have spent almost my entire career as an operator owner of businesses, buying and selling those businesses. So, by nature, I look at things from an operator's perspective.

1. Organizing Your Data

The first element we're going to discuss is organizing your data. It may sound simple but it's never as simple as you think. It involves organizing documentation such as three years of tax returns statements, your most recent real-estate leases, and property information, if you own your property. You might want to consider reviewing your lease to make sure that you have ample time left or options to exercise. In order to sell the piece of property and the business it must stretch the term of a new loan. You will need to make sure there are no operational clauses in the lease that would be detrimental. Take a retail operation for example, if there is a ‘No Going Dark Clause’ or a ‘Continuous Operation Clause’ buyers would typically look at those as a “no going forward clause” because they could be detrimental in the case of a business downturn. Black Diamond has an amazing self-guided program for this process called Self-Guided Business Preparation Program. This program can help you organize this information as well as prepare your business to be sold!

2. The Value of your Business

The second aspect that we need to discuss involves the value of your business. You should have an idea of what it is worth. Every business is worth a multiple of the cash flow. It doesn't matter what the business is, each one is worth a multiple of the cash flow. Those multiples are determined by industry, risk, and reward. The multiple would be somewhat standard throughout a given industry. Black Diamond can help you determine a range of values by completing a business analysis that will help you zero in the value to any prospective buyer.

3. Keep Operating Your Business

Something very important to remember is to re-energize yourself to achieve operational goals. Sometimes, when operators start the process of selling a business, they might only focus on selling rather than operating. When that happens, they relax operational standards and run their business differently if they even remember to run it at all. My advice to you is to operate as if you were keeping it for the next 10 years, re-energize yourself, and make sure you put that energy back into the business so that you continue achieving your operational goals. Remember, for every dollar you increase your net income and cash flow, it is multiplied to determine the value of your business. That will help you to keep that business growing and increase the potential value for the sale.

4. Identify Potential Buyers

Your fourth matter will be to identify the potential buyers who will value your business the most. There are possible strategic partners that will want to add your business to theirs. There are those that possibly compete with you who would want it off the market or as their sister location. Now, there are advisors that can help determine who your potential buyers through the marketing process. Black Diamond can help you market your business in a safe, secure, and private way, negotiate the Letter of Intent, and complete the purchase agreement.

5. Determine Your Leverage

I've always tried to negotiate with a win-win intent but, at the same time, analyze where the leverage is. So, the final aspect to consider is how motivated you are, as the seller, and how motivated the buyer is. This is important to understand because it can determine how people will negotiate and it can help you secure the highest price possible. By establishing the leverage and understanding how to use that in negotiations, you will get the most out of your business. That is also something we at Black Diamond can help you with.

A Final Word of Advice from Black Diamond

As long as you follow that simple advice, and complete all of the necessary paperwork, all you have to do is close the deal. Remember to be calm and relaxed. Remain professional and don’t appear too eager. Compile your information on time and keep all associated parties in the loop.