Planning how to transition out of your business is a critical decision for executives and entrepreneurs. If you’re considering selling the business – either to external or internal interests – get a head-start on the process with these questions you’ll want to have or find answers for if you decide to sell.

1. 30 Questions to Answer
Before You Sell Your Business

2. Personal Considerations
table of contents
Financial Considerations
Transition Timing
Value Drivers for Potential Buyers
Transaction Structure & Process
01
02
03
04
05

3. Want to sell your business –
now, or in the future?
​Every business is unique, so every
business transaction is unique.
​Your business’ ownership will transition one way or
another someday. It’s to your benefit to plan that
succession long before it takes place.
​Long before you’re ready to hand over the reins of your
business, you should begin planning for how, when, and
sometimes even to whom that will happen. Taking a long-
term view on the exit strategy will help a business owner
make decisions that can maximize the after-tax value to
the sellers of the business.
The questions that follow will highlight critical areas you
need to consider before you begin the selling process.
Introduction

4. Personal Considerations

5. Why do you want to
sell your business?
​The answer to this question – ranging from a
need for liquidity to health problems to
transitioning to a next generation – will help
determine the timing, types of buyers who
may be interested, and potential opportunities
and barriers to the transaction.
Personal Considerations
section 01

6. What will you do with your time?
​If you are currently active in your
business, what do you want to do after
the sale?
 Which of these sounds like your plan?
• Continue to work in the business for the new owner,
grow the business with its greater resources, retain a
financial interest in the business and look forward to
a second payday in X years.
• Hand the new owner the keys, pack my office and
retire ASAP to Arizona/Florida/Palm Springs.
• Continue work to transition to new owners for X
months, then retire and move to Arizona/Florida, etc.
• I have other business interests, I need capital and I
need to move on quickly.
• I have other personal interests or endeavors in mind
and I need to move on in due time.
• I don’t know.
​If you do not have a plan for your life and your
time after you have sell a company, you will
likely find that selling the business and letting
go of something that has been a large part of
your life will be difficult.
​Your answer to these questions will
affect the price, terms and type of
buyer you need to seek.
Personal Considerations
section 01

7. Are others aware and
supportive?
​Are your business partners, co-owners,
stakeholders and family members aware
and supportive of selling the business?
​Without a consensus for sale among key
stakeholders, a sale is more likely to become
derailed by objections – real or imagined –
along the way to a closing.
Personal Considerations
section 01

8. What is your income
requirement?
​How much income do you
need to support you and your family
in your preferred lifestyle for your lifespan,
and how will you access it?
​This is a key factor in whether you’ll have the type
of lifestyle you hope to maintain or achieve. If you
have other investments or sources of income
aside from the business sale, this may not be a
consideration in the business transaction at all.
Personal Considerations
section 01

9. 9
What will you do
with your money?
​Is your personal financial plan up to date?
What is your plan?
​If you don’t have a current personal financial plan,
or know how you plan to handle any proceeds
from a business sale, you may not be prepared to
make the most informed decisions about a
business transition, nor prepared to take
advantage of a potential cash infusion effectively.
Personal Considerations
section 01

10. Financial Considerations

11. What is your business worth?
​Understanding your business’ value will
provide a baseline from which you can
evaluate buyers and their offers.
​You need at least a rough sense of your
business’s value to a prospective buyer, and,
ideally, an accurate and recent business
valuation conducted by an appropriately
credentialed business valuation professional.
Financial Considerations
section 02

12. How much do you
need to be paid?
​How much do you need to be paid to
make the sale worthwhile for you?
​This is not necessarily the same as your
business’ value.
​Depending on your needs, it may be higher or
lower than an objective valuation of the
business’ worth.
Financial Considerations
section 02

13. What story do your
financial statements tell?
​Do you have audited financial
statements? If not, do you have
professionally prepared financial
statements for at least 3 to 5 years?
​When you are asked about your business, in
detail, can you describe your business to
someone – your product lines, your divisions
or departments, your story?
​Can you pull up a timely financial statement
that sets forth the information consistent with
that story? That sets forth the operations of
those divisions and product lines as separate
profit centers?
​A potential buyer will want to see accurate,
timely, and well-maintained financial records –
ideally, financial statements which have been
audited by an independent auditor for several
years. Having appropriately audited financial
statements helps give the buyer peace of
mind that the information is an accurate
representation of your business’ current
financial status.
Financial Considerations
section 02

14. Can you show
the buyer the money?
​How predictable are your business
operations?
​Are the business’ revenue streams from
different customer types or industries, and its
revenue streams from different products or
services predictable?
What about revenue streams for different
types of customers and products, historically?
​The less predictable your revenue streams,
the more difficult for potential buyers to see
and understand their future earnings. Volatility
in your revenue stream can spook a buyer, but
if you can demonstrate predictability in certain
segments – customer types of industries,
products, etc. – that can help offset
fluctuations in other segments.
Financial Considerations
section 02

15. How accurate are your future
earnings stream projections?
​Do your financial statements demonstrate
and support your claim for your business’’
future earnings stream?
​“Financial” buyers are seeking a predictable
earnings stream whereas “strategic” buyers are
interested in acquiring a company for a specific
strategic reason (for example, eliminating
competition, picking up new customers, or
access to intellectual property).
​Either way, both types of buyers are interested in
how the company’s earnings will offset the cost
of buying the business. All business acquisitions
are expected to pay for themselves.
Financial Considerations
section 02

16. Are you planning to provide
maximum tax benefits?
​Is your business structured to provide
maximum tax benefits to you and to
buyers of the business?
​C corporations are taxed at both the corporate
and individual owner level, while S corporations
and some other entity types (“pass-throughs”)
are taxed only to the owners. “Single tax”
structure reduces the gain on sale of the
business.
​Further, in general, buyers are less willing to pay
premium prices for a C corporation’s stock,
because they lose future tax benefits. A mergers
and acquisitions advisor can help you best
structure your capital, ownership and type of
entity to create greater after-tax value for you as
a future seller and value to the buyer.
Financial Considerations
section 02

17. Do you need cash?
​How long are you able to wait to receive
the entire sale price of the business?
​A need for quick liquidity can hurt the selling
price of the business; if you’re patient, you may
be able to ask more if the purchase price isn’t all
due immediately.
Financial Considerations
section 02

18. Who’s watching the change?
​Are you monitoring the change in value of
your business?
​Privately held companies cannot monitor their
market value daily in the market, but in
consultation with a business valuation
professional, they can develop a benchmark
value, which is an over-simplified but
straightforward calculation of an indicated value.
​This benchmark value is a component of the
monthly financial reporting package that helps
management to identify trends in the company’s
value.
Financial Considerations
section 02

19. Transition Timing

20. Are your ducks in a row?
​Is your business ready to sell now, or are there
operational, legal, financial or personal matters
that must be taken care of before you can
consider a sale?
​Is your business “showroom ready” for a potential buyer
to conduct due diligence? If there are matters you’d prefer
to settle so as not to alarm a potential buyer (for example,
a lawsuit being settled or a key employee considering
taking another job), or that simply need to be taken care
of before a sale can occur (for example, completing your
most recent audit, that state tax nexus study, or other
outstanding matters), check those items off the list so that
if a prospective buyer turns up quickly, you can take
advantage of the opportunity instead of missing it.
Transition Timing
section 03

21. How long will you wait?
​How much longer are you willing to stay
in the business? Are you willing to wait
months, or even years, for a business
sale to take place?
​
The time to consider selling your business is
before you NEED or WANT to sell it. A business
transaction is a process, not an event, so if you
have a short deadline, you may be forced to sell
for less than you’d wanted to meet your
timeframe.
Transition Timing
section 03

22. Can you walk away?
​Are you mentally prepared to walk away
from the business if the transaction does
not include a future role for you?
​
Strategic buyers may retain a business owner
for his or her relationships, management skills
or other knowledge. But if a buyer plans to
install his or her own team, are you prepared to
step away from what may be a lifelong identity
as a business owner and executive?
​Many business owners may find themselves
getting cold feet during a potential sale if they
are reluctant to give up some of the visibility
and perks that accompany running a company.
Transition Timing
section 03

23. Who is on the
“do not sell to” list?
​Are there specific buyers or types of
buyers you are NOT willing to sell to
(such as competitors)?
​If you have goals beyond financial ones, such
as ensuring that the business continues on after
you leave, you may not want to sell to a
competitor who would simply shutter the
operation.
​These limitations may decrease your pool of
potential buyers, but it may be more important
to you than maximizing the final sale price.
Transition Timing
section 03

24. Value Drivers for
Potential Buyers

25. Do you know your SWOT?
​Can you outline your company’s
strengths, weaknesses, opportunities and
threats from the perspective of a potential
buyer?
​Financial and operational analyses like these
are how potential buyers will evaluate your
business.
​Before you consider a sale, try to envision how
a future buyer would see your business – both
good and bad. Then take what steps you can to
eliminate the bad and heighten the good.
Value Drivers for Potential Buyers
section 04

26. Are you keeping up?
​How does your business compare with its
peers and competitors?
​A potential buyer will look at how your business
stacks up against others with a similar business
model or type of product. If your industry offers
benchmarks, see how you compare and where
you might need to work on improvement.
​Additionally, a prospective buyer may be
looking at not just how your business performs
compared to a competitor, but whether that
competitor may be a better acquisition.
Value Drivers for Potential Buyers
section 04

27. Who’s looking to buy?
​Do you have a sense of what kinds of
companies might be potential buyers?
​What companies would strengthen their market
position or strategic advantages by purchasing
your company? What types of buyers have
already purchased companies in your industry?
​These may be strategic buyers, while financial
buyers may come from a much wider spectrum
– any company looking for an acquisition with
good earning power and the potential to make
a profit through sale in the future.
Value Drives for Potential Buyers
section 04

28. Do you have a good team?
​Do you have a strong and stable
management team in place?
​A company with a stable, predictable, and
strong management team in place is worth
more than one with high management turnover
or key positions in transition.
Value Drives for Potential Buyers
section 04

29. How diverse are
your operations?
​Are your customers spread over a
diverse range of organizations, or is your
revenue highly dependent on a few large
customers or orders?
​Your earnings stream is more resilient if your
company has a diversified customer base. If a
high percentage of earnings is tied to one or
two key customers, earnings projections could
quickly change with the loss of those major
customers, and that is a risk potential buyers
may not be willing to pay a premium for.
Value Drives for Potential Buyers
section 04

30. How stable is the future?
​Are the primary factors affecting your
business’ success fairly stable – such as
regulations, raw materials or vendor
prices, market demand, and technological
innovation?
​Any business can be disrupted by unexpected
events, but if the industry you’re in is in the
midst of transforming change, buyers may be
more wary and less willing to gamble on a
purchase.
Value Drivers for Potential Buyers
section 04

31. Who’s on the field and who’s
on the bench?
​Do you have a succession plan in place
for not only yourself but also for your key
management team members?
​This is a critical consideration for strategic
buyers, who may seek to retain the entire
management team.
​Regardless, even financial buyers will want to
know a succession plan is in place, as
leadership turnover can greatly affect customer
relationships, employee retention and earnings.
Value Drivers for Potential Buyers
section 04

32. Is there a talent gap?
Value Drivers for Potential Buyers
section 04
​Are the people included in your
succession plan aware of their role?
​Do they have the training, skills and
experience to perform their duties?
​Does the organization have a clear
understanding of the plan?
​A succession plan is more than a vague idea
of what might happen if you leave the
company. It is a time-specific, person-specific
plan for how the right leaders will gain the right
experience and training to take on their roles
in the company’s future that is shared and
understood within the company.
Operating without clearly communicating a
succession plan risks losing employees and
leaders who don’t know what the company’s
future is and what role they may play in it.

33. Transition Structure
and Process

34. Is there a consensus?
Transaction Structure and Process
section 05
​Does everyone who can veto a
transaction agree on the transaction’s
financial and timing requirements?
​The time to discuss transaction goals is before
the company seeks buyers – not during the
transaction process. Getting consensus before
the company goes to the market helps avoid
some of the emotional decision-making and
changes that can delay or kill a deal
altogether.

35. What will you concede?
Transaction Structure and Process
section 05
​Have you considered what types of
concessions you may be willing to make
to further transaction – and what types
you will not?
​Before any offers are on the table, consider
what deal-makers and deal-breakers may be
for you – but try to remain as flexible as
possible to get the best offer.

36. What about wealth transfer
considerations?
Transaction Structure and Process
section 05
​Are there wealth-transfer considerations to
next generations that should be built into the
transaction or purchase price?
​If you hope to pass on wealth acquired from a
business sale to children or grandchildren, estate
planning professionals should be consulted to
minimize estate tax liability.
​Tax and estate planning may offer strategies such as
a portion of the sale proceeds going directly to next
generations, which are presumably taxed at lower
rates.

37. Who’s advising you?
Transaction Structure and Process
section 05
​Have you identified qualified and trusted
advisors to help you through the
process, including attorneys, business
valuation specialists, CPAs, and
business brokers experienced in
mergers and acquisitions?
​Selling a business may be the single largest
transaction a business owner ever engages in.
It requires specialized knowledge of business
law; business, estate and individual tax
regulations; business valuation, corporate
finance, and many other highly technical and
regulated areas.
​Trying to go it alone can cost you lost
opportunities, wasted time, fewer and lower
offers, and higher risks. Any fees paid to have
professionals help guide you through the
maze of a business sale are more than
recouped in peace of mind and a higher
likelihood of a successful sale.

38. Contact Us
For more information, contact us for
a free initial consultation on how we
can help build value with your business.
Gary Gibbs, CBA, ABV
Executive Vice President
Corporate Finance Services
316.291.4014
Gary.Gibbs@aghlc.com
Mike Shook, CM&AA
Vice President
Corporate Finance Services
316.291.4041
Michael.Shook@aghlc.com