Each year, thousands of businesses are sold. Unfortunately, due to lack of proper preparation, many would-be sellers end up remaining owners. Studies suggest that between 20 and 30% of companies offered for sale actually sell. Adherence to our suggestions should increase the likelihood of a timely and successful sale.

Begin preparing now. Are you considering selling your business within the next 5 years? If so, then you should develop a priority list of issues that, if addressed, would alter the company’s value. These issues are usually the same that you would normally focus on, but the daily battles sometime prevent owners from dropping that losing product, documenting a process, training a replacement, or resolving a legal liability. Now is the time to invite an experienced, unbiased professional to review your business “through the buyer’s eyes”. An experienced M&A advisor can review your business and provide a list of perceived strengths and weaknesses that may cause significant swings in the amount a buyer will pay for your business.

Timing is critical. Timing the sale according to your energy level, capabilities, and financial situation is important. An owner normally thinks of selling when business is down and forgets the idea when business is up; reverse this thinking to maximize your sale price. Do not postpone a decision to sell. More than 50% of small business owners hold on to their businesses until boredom or burnout sets in. As the owner loses focus, the lack of attention leads to a drop in the bottom line and therefore the company’s value. Other owners put off selling while hoping for a business turnaround only to find the business value continues to deteriorate. Remember, delaying the sale until health or business conditions force a sale at depressed prices puts the owner in a double bind.

Internalize the decision to sell. You need to make a firm decision: do you really want to sell your business? A survey conducted by the International Business Brokers Association (IBBA) found that the biggest obstacle to a sale is the owner’s wavering decision to sell. Yes, this is an emotional decision, but the time to deal with your feelings and concerns is before sitting down with a prospective buyer. How will you react to the new owner’s changing of business policy and assuming your role with company employees and customers? Visualize what you’ll be doing with your time after the sale and start planning now for that inevitable day when someone else is sitting at your desk.

Select a business intermediary. You’ll need someone to facilitate the sales process. The steps to a sale include: valuing the business, obtaining and qualifying prospects, providing a booklet that details the business after a confidentiality agreement is signed, more qualifying by both parties, discussions and visits, signing a preliminary agreement, exchanging more information, final negotiations, preparing the contracts and finalizing the sale. Surprisingly, some successful owners abandon good business practices when selling by leaving the process to chance. When you decide to sell, be sure to interview and select the business professional that can best package and market your company to the most qualified and largest audience. During the interview ask about marketing strategies that will reach the greatest number of potential buyers without alarming employees and customers. Evaluate the individual’s experience in market research, business analysis, selling and contract negotiations. What sort of information services does the advisor have access to that will provide you with current industry comparisons and lists of prospective buyers? Will the advisor’s top people personally participate in visits and negotiations with the buyer? Review materials used to market other clients and select someone who will work well with your accounting and legal counsel.

Overpriced businesses don’t sell. Set a realistic price using an evaluation based upon your financial reports as well as comparable business sales. The most qualified buyers are also the least likely to agree to an inflated price. Before looking for buyers, your advisor with your tax advisor should identify ahead of time the terms that best fit your financial and tax situation. Be prepared to negotiate; remember, you have already decided to sell. Your experienced broker will be able to suggest the terms which are appropriate for your business and market area.

Anticipate questions. The booklet your advisor has prepared should answer most of the buyer’s questions prior to a written offer. In the meantime, begin updating and gathering the information that a serious buyer will ask for including: detailed financial statements, equipment lists, leases, benefit plans, compensation tables, shareholder lists, corporate minutes, tax returns, major customers by volume and a supplier list.

When you started your business you probably mortgaged your home, experienced sleepless nights, worked long hours and made a lot of other sacrifices. It takes some introspection and planning to make sure you derive an equitable return.