How to
Put your business up for sale
Pittsburgh Business Times - by Jennifer Curry
Selling a business starts with committing to the sale and ends with letting go.
Oftentimes, for company founders, selling a business isn't easy. There are multiple steps, the business can be hard to give up, and the first steps start years in advance of the anticipated sale.
"The person selling a business should prepare themselves emotionally," said Diane Sandstrom, a consulting manager at the Duquesne University Chrysler Corp. Small Business Development Center. "(Then), they should make sure they've created a reputable image for their company and make sure the business is running well."
The business owner also needs to start cleaning up financials and searching for ways to add value to the company, according to Marilyn Landis, president of North Side-based Basic Business Concepts Inc.
One way is to search through financials and point out areas where value can be enhanced. Oftentimes, business owners prepare statements in a way to keep taxes low, but this often doesn't show the full value of a company. By making the value clear to potential buyers, the sale may go more quickly, Landis said.
Having company books edited by professionals can also help speed up the process, Sandstrom said.
The owner also needs to start going through the business valuation process to determine a realistic price range for the company.
According to Landis, looking at the value of individual areas of the business can help determine what might have the most value. For example, a record company likely would be hard to sell, but a side business distribution network might be more valuable.
Questions to ask during this process include whether there is enough cash flow to support the sale, who would be a good buyer and whether to keep the business local or not, Landis said.
It's also important to examine the tax consequences of a sale, said Scott Myers, a partner with Monroeville-based Thompson & Myers PC and president-elect of the Pittsburgh chapter of the Pennsylvania Institute of Certified Public Accountants. Doing so will help the owner determine what type of sale to make, such as a stock sale or an asset sale.
Then, it's time to search for potential buyers. During this process, it's important to watch out for interested buyers who can't actually buy because this wastes time and hurts the seller's credibility if a deal falls through.
"You need to be concerned about disclosing information to buyers that can't buy," Landis said.
Once a buyer has been identified, it's time to negotiate the deal. During the negotiations, the seller needs to decide whether it will sell the entire entity or keep some assets and whether the seller will continue working with the buyer after the sale.
It's also important to get a lawyer during this process and put everything in writing, Myers said.
"Once it is in writing, there is less likely to be misunderstandings," Myers said.
jcurry@bizjournals.com | (412) 208-3820
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