Thinking like a prospective business buyer could be the difference between selling your business and not selling your business. This is why, when dealing with a buyer, it is of paramount importance that you always try to put yourself “in the other person’s shoes.”
It is easy to think that because everything is going smoothly with the sale of your business that the tough part is behind you. That may be true, but there could still be problems ahead. Issues can come up at a moment’s notice when either your prospective buyer or his or her advisor raises a red flag. Additionally, the larger the business, the greater the complexity. This translates to a greater risk of problems arising.
The “Little Things” that Could End Up Quite Big
Financial statements are of considerable importance. Quite often you’ll see contingencies regarding financial statements and/or business tax returns, so be ready and be organized. Lease issues are another common area for contingencies. Falling under the lease issue umbrella are topics such as whether or not the seller has agreed to stay on, or issues regarding the property (or needs associated with the property if it is rented).
Other common contingencies can include issues arising from equipment and fixtures that are being included with the sale. These are areas that could be easy to overlook, but they can throw a major wrench into the workings of a deal. The so-called “little things” can cause a deal to fall apart.
3 Key Steps for Preventing Disruptions from Contingencies
Step 1: Create a Comprehensive List
One easy move you can make to prevent disruptions from contingencies is to make a list of all FF&E–furniture as well as fixtures, equipment, or any other items that could be included with the sale. If an item is not included, be sure to remove it entirely from the list.
Likewise, if an item is inoperable, then repair it ahead of time. At the bare minimum, you could make a list of items that are currently inoperable and include those items in your list. Remember, you don’t want a last-minute surprise or misunderstanding to jeopardize your sale.
Step 2: Check Your Leases
Problems with leases can send deals spiraling out of control. It is a prudent investment of your time to look at things like your leases. You’ll want to make certain that there are no issues that could be viewed as problematic. If there are issues, then it is best for you to disclose this information at the start of any deal. After all, you don’t want to waste anyone’s time, including your own.
Step 3: Predict Questions and Have Answers Ready
The time you invest in predicting potential questions and having the answers to those questions ready is time well spent. You’ll look prepared, and that helps build trust.
Be ready to answer questions that are likely to arise, such as whether you are going to stay on with the business for a given period of time and what will be the cost, if any, of you doing so. What about employees staying on? Are there legal issues that should be considered? Being able to answer these kinds of questions is a prudent step.
Considering the needs of your prospective buyer will help you make a sale. In selling a business, there is no replacement for being organized and prepared.
Copyright: Business Brokerage Press, Inc.
Photo: iStock Photo; credit: Ridofranz
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