This document discusses the importance of being prepared for a potential business sale. It notes that time is critical, so sellers should have an exit strategy and documentation ready. When a buyer expresses interest, the seller needs to be able to provide information quickly or risk losing the deal. Key items for due diligence include financials, contracts, legal structure, and identifying any potential issues for the buyer. Being prepared allows a sale to move forward smoothly if an opportunity arises.

1. BY TREVOR CROW | WWW.BIZTAXBUZZ.COM

2.  Time is the biggest deal killer, so being prepared is the
best way to put your business in a position to sell when
the opportunity comes knocking.
 Selling a business is a time sensitive process.
 When a potential buyer is ready to pull the trigger, the
business owner must be prepared to close the deal quickly
or the buyer may lose interest or find another potential
target.
 I believe it’s one of Newton’s laws of motion that says
things in motion tend to stay in motion.
 Well, deal momentum works the same way.

3.  Sellers with a proper exit strategy will
increase the likelihood of getting their
business sold and getting it sold at a
favorable price.
 The goal of the Seller is to have a seamless
and profitable sale in the shortest amount of
time.

4.  You’ve probably heard the adage that companies
are bought not sold.
 This saying came about because potential buyers
decide to make an offer when they are ready,
which is not always when the target company is
thinking about selling.
 In addition, often the best time to sell a business
comes quicker than the business owners expect.
 As a result, the owners start the marketing and
preparation process too late.

5.  Many times a company is ripe to sell while
revenues are growing each year rather than
after the growth curve has flattened.
 Business owners should consider contacting a
business broker or investment banker during
this growth phase to get a better idea of the
business value and prospects for sale.

7.  When a buyer is ready, the target company
can increase its likelihood of completing a
transaction if it is ready at the same time.
 Recently, the trend has been for buyers to
request more information than in the past.
 Having documents in digital format will speed
up the disclosure process.

8.  A good starting point is to get a due diligence
checklist from your attorney, business broker, or
investment banker.
 However, the form checklist most likely will not
have everything that will be important to a
potential buyer of a particular company.
 Thus, the business owners should think about
the unique items relating to their business that a
potential buyer would be interested in reviewing.

9.  Some of the basic information that the buyer
will need is the company’s legal structure,
distribution methods, board and
management composition, key service
providers (auditors, tax professionals, and
attorneys), independent contractors and key
business contracts.
 All companies have warts and some more
than others.

10.  Business owners should be prepared to
address these issues with a potential buyer.
 Demonstrating a plan to deal with ongoing
issues or providing documentation to show
that certain issues have been put to rest will
go a long way in easing the potential buyer’s
concerns about these issues.

11.  The buyer will inevitably inquire about the
warts or will include representations in the
purchase agreement to flush out responses
from the seller.
 If a surprise arises late in the process, the
buyer may kill the deal or attempt to
renegotiate the terms.

12.  The easier the buyer can make the due
diligence process for the seller, the more
likely the deal will close.
 Further, providing full and accurate due
diligence information can protect the Seller if
a dispute arises after the sale.

13.  For example, if revenues drop the first year that
the buyer operates the business, the buyer may
look for misrepresentations in the purchase
agreement to seek recourse against the seller or
tap into an escrow fund if one has been created.
 If the seller provided full and accurate disclosure
about the business, then the seller can make the
argument that the potential issues were known
and accepted by the buyer at the time of the sale.

14.  Often a potential buyer may be a current
competitor of the seller.
 These strategic buyers may have different
levels of interest and could be fishing for
sensitive intellectual property of the seller.
 Under these circumstances, a seller may want
to stagger the disclosure of information until
the seller can determine the seriousness of
the buyer.

15.  Buyers often request all information at the
beginning of the process.
 If the initial request includes sensitive
information, it may be up to the seller’s advisers
to explain to the potential buyer that the goal is
to preserve the value of the company, which
could be weakened if too much information is
disclosed initially to all potential buyers.
 Highly sensitive information should be made
available only when a deal with a particular buyer
becomes inevitable.

16.  Time is the biggest deal killer.
 The key is to keep deal momentum going
after it starts.
 Thus, it’s never too early to begin preparing
for the sale of a business and beginning to
compile the due diligence documents that a
potential buyer will request.