What you can expect when selling your business

Building value in your business — and cashing in when you exit —  is one of the primary distinctions between someone who is an entrepreneur and someone who is just a small-business owner. All those years of hard work and self-sacrifice are supposed to pay off in the end.

But do they? The answer is “it depends.” So much depends on you, the owner, and whether you’ve prepared your business and yourself for your departure. Many things can go wrong. Successfully selling a business is rarely a simple task.

Here’s my advice to owners considering an external sale as an option for their exit someday:

Plan ahead. Don’t wait until it’s too late. “Too late” is when you are sick or dead or have a need to leave the business driven by factors you can’t control. Plan ahead and start early. My experience is that once you decide to sell and start taking steps to make that happen, you’ll probably need a year or so to actually execute a transaction. It may take much, much longer, however, to ready your business for a sale.

Ready your business. I will never forget a Dallas-Fort Worth-area engineering firm whose owner wanted to sell and move to San Diego. Before we could even try to sell that company, he needed a new business plan, a new organization structure, five key roles filled and a wide variety of financial, HR and marketing problems fixed. That took a year to accomplish. Then and only then could we start marketing the firm to prospective buyers. We did eventually sell it for a very good price.

Seek the advice of competent accountants and attorneys. I could say this until I am blue in the face, but you need qualified accountants, attorneys and other advisers. Not all CPAs have extensive experience in minimizing tax consequences of a business sale. Even fewer attorneys have experience in the sale of businesses and fewer still have experience with businesses in your particular industry. Whomever that is is who you want working for you. Their experience will be worth whatever you pay them. The worst people to help you through the sale are your regular accountants and attorneys. Not only is it probable they aren’t qualified, some may even throw up barriers to the sale because they know they’ll be losing a good client (you) after the sale.

Have a history of outside accountant-prepared financial statements. Audited statements are best, reviews second best, and compilations third best. Any of those are much better than internal statements. And buyers will want to see both income statements and balance sheets.

Have good info on all of your assets. If real estate is part of the deal, include an appraisal of it. Have a detailed inventory list. If you are a service business, be ready to share your client list and backlog of work. Buyers need to know what they are buying. So often, sellers don’t have this information which does nothing but slow down or sabotage the process.

Be realistic. You aren’t going to get paid entirely in cash at closing. You aren’t going to sell for twice what you are really worth. You are going to have to stick around for a year or two or even more after the sale. You won’t make as much money post-sale as you made when you still owned the company. On top of that, post-sale, things will change, no matter what buyers might promise. And you will likely no longer be the ultimate boss, which can be really hard for some people to accept. Again, these things may seem obvious, but a lack of experience with selling businesses results in some sellers having wholly unrealistic expectations and being naive about the process.

Mark Zweig is the founder of two Fayetteville-based Inc. 500/5000 companies. He is also an executive in-residence teaching entrepreneurship in the Sam M. Walton College of Business at the University of Arkansas. The opinions expressed are those of the author.