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 Finding the right buyer for your business 
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Joined: Thu Dec 08, 2005 6:28 pm
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Post Finding the right buyer for your business
For those of you thinking of selling your business:

The value and importance of estate planning are obvious. Preparing a will, naming beneficiaries and establishing trusts may all be important steps in your plan.

But if you are a business owner, the complexity of your estate planning increases substantially. Your heirs will be unable to enjoy the true value of your business unless you find and train the right successor well in advance.

According to the Small Business Administration, more than 40 percent of small businesses are facing the issue of ownership transfer or sale. Some business owners have family members who are willing and able to step in and take over. However, many do not. If this is the case, then your strategy probably involves selling your business. When the time comes to sell your business, recognize that all buyers are different, and finding the right one is the key to maximizing the value of your estate and ensuring the future success of your employees and customers. Follow these steps to find the right buyer for your business:

Develop a high-quality and comprehensive document that describes your business and its background. You will share this document with prospective buyers who are developing their first impressions of your business. Clearly disclose any negative issues that are involved in the business. Disclosure will reduce litigation risks, add to your credibility with potential buyers, and save you time by eliminating those who are unwilling to accept the realities of your business. Most importantly, portray a vision of the future for your company. Buyers need to understand your company's past, but keep in mind that they are investing in its future.

Create a "profile" of the ideal buyer. You possess skills that are critical to the success of your business, and you want to find a buyer with similar characteristics. Also remember that a buyer with additional skills, aspirations and resources may be able grow your business substantially and consequently may be willing to pay more for it. Although you probably don't want to put a price on your business, you will need to know how much a bank is willing to lend for the acquisition and how much cash a qualified buyer will need. Don't waste your time with buyers who are not financially qualified or who are expecting you to finance the transaction.

Market the business proactively -- but confidentially. Your goal in the marketing process is to engage multiple qualified buyers. Therefore, you should directly contact individuals, business owners and investors who fit the profile you have developed. As you begin to market the business, don't reveal the name or location of your business to prospective buyers unless they have signed a confidentiality agreement that protects your information and the fact that your business is for sale. The loss of confidentiality could put you at risk of losing key employees or customers; and that can negatively impact your operating results and reduce the value of your business and, ultimately, your estate. Once your confidentiality is protected, you need to give prospective buyers enough information to make a decision about moving forward, but you don't need to give away the company secrets. You don't reveal employee or customer names until much later in the process, when you have agreed with a buyer on price and terms.

Screen buyers aggressively. Meet them in person and spend time learning about their backgrounds and goals, their desired return on investment and their plans for growth. Assess their perception of your customers, employees and suppliers. This competitive marketing process gives you the best chance of negotiating the best price and tax treatment, and it also allows you to choose from multiple buyers who may differ in background, personality or cultural fit with your business. You can only evaluate these characteristics if you have spent some time with the prospective buyers.

Engage a team of trusted, experienced professionals to aid you in the process. Your accountant and your attorney will play key roles, and their expertise will be invaluable in consummating a successful transaction. You may also benefit from the assistance of an experienced intermediary, broker, or merger and acquisition firm that specializes in selling privately owned businesses. An intermediary can help you manage the entire process so that you can remain focused on running the business and selecting your successor. Before hiring an intermediary, make certain that they do not charge up-front fees, that they have a litigation-free track record and that you can work with them closely and successfully over several months.

Finding the right buyer for your business does not happen overnight and it does not happen by accident. Rather, it is the direct result of a carefully planned and well-executed process. Do your homework and plan ahead, and your estate will realize the benefits.

MIKE GRUBB is a partner in Acquisition Services Group (ASG), a regional merger and acquisition firm specializing in the sale of privately owned manufacturing, distribution and service businesses. Reach Grubb at 425-450-4800, send an e-mail to mike@asgnorthwest.com or visit www.asgnorthwest.com.




Puget Sound Business Journal (Seattle) - March 3, 2006by Mike Grubb


Tue Mar 07, 2006 11:47 am
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Joined: Wed Jan 18, 2012 6:49 am
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Post Re: Finding the right buyer for your business
Great post. Thanks a lot for sharing.

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Wed Jan 18, 2012 9:00 am
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