Selling A Small Business In Houston: Suiting Up For The Spotlight

Selling A Small Business In Houston: Suiting Up for the Spotlight

Preparation for putting a business on the market is like the stage rehearsal for a debut the main the spotlight.

Selling A Small Business In Houston: Suiting Up for the Spotlight

When entering the center stage spotlight, both a business owner and a star performer must know their roles, the script, the story, as well as the other major players involved. The goal of both are to achieve the desired response for their portrayal of the story from their own specific audience, rave reviews for the actor and offers to buy the business for the owner.

The Players

Directing and orchestrating the behind-the-scenes activity for the successful debut of a company, is a business brokerage firm -- also known as a business intermediary. The team that a business owner puts together to assist in the structuring of the business sale will play key roles in the transaction. Depending on the size and complexity of the business, the usual team of experts may also consist of the firm's accountant and attorney. In order to insure a smooth process, it is recommended that all team members be experienced in business transfer transactions.

The Business Owner's Role in the Rehearsal

Before dressing up the company for its introduction to the marketplace, be ready to share its best features, as well as its blemishes. All will become visible under the due diligence spotlight. As in the classic tale, "The Emperor's New Clothes," it doe not take a rocket scientist to see what the cloth is really made of. Problems uncovered late impugn the integrity of all involved and threaten the price--and the deal. The more issues brought to the table and worked out in advance, the better chance of a smooth closing.

The role of the business owner is to be the source of information necessary to accurately assess the firm. Addressing the following issues will help maximize the value of a company, provide transparency to prospective buyers, and minimize the amount of time consumed in the sale process. This information will be the foundation of the script that will tell the story to the target audience...the marketplace of buyers.

Why is the business on the market? This is not only important from the buyer's prospective, but an owner must have a sincere motivation to sell in order to facilitate a smooth process.
Are accounting procedures in place and easy to follow?
Are profit and loss and balance sheets well prepared and clean?
Are the facilities and equipment in good working condition? Curb appeal makes an impression. When someone walks into a business establishment, they are looking at everything. An orderly and organized facility gives a good feel for how the business is run.
Is intellectual property well documented and up to date?
Is there an appropriate lease in place and is it transferable?
Are customer contracts secure and transferable?
Are their employee contracts, are they well documented?
Are operating procedures documented and in use?
Are there outstanding legal or financial aspects that may hinder the sale?
How is the business positioned in relation to the competition?
What distinguishes the business from others in the same field?
What services or products are offered that are unique?
What niche is served?
Are there areas for future growth?
The Story
Once information gathering is complete and data is analyzed, a selling price range will be determined and a company profile will be formulated. This is the story about your business. It will be the marketing tool that articulates and presents the message about your company to the target audience of buyers.

The Script

The script is made up of the individual pieces that tell the story. The following are individual items that will be pieced together by the prospective buyer in order to substantiate the story and justify the asking price.

Financial statements. Accurate financial statements not only adds to a buyer's comfort level, it more likely will result in a higher sales price. A potential buyer is typically looking for a predictable cash flow from the business. Three, four or five years of professionally prepared financial statements and tax returns will show them that.
Trends in accounts receivable and payable. When selling a business, you want to show that you have good customers who pay on time. Seasonality of cash flow and concentration of the customer base are also underlying themes of the story.
Make sure patents, trademarks and other property rights are properly registered.
Review contracts for third-party consents needed in order to facilitate a transfer.
Well-organized and updated collateral materials such as employee handbooks, policy manuals, mission statements, or an online Internet presence add value in the eyes of the purchaser. Other collateral such as brochures, press releases, advertisements, and marketing campaigns such as mail out or email programs add credence to the story.
A list of furniture, fixtures and equipment along with applicable service records shows the buyer that the company is well maintained. Remove excluded items prior to the sale, or list items excluded from the deal separately.
Being prepared for the questions the buyers will ask, will facilitate a smooth process for all involved.

The Successful Performance

Proper rehearsal and having the necessary props in place for presenting a business to the targeted audience is key to attaining the desired outcome...the successful sale of the business in a timely manner...the whole reason for the show.

Certified Business Brokers (CBB) has been selling businesses since 1974 and is one of the pioneers of the business brokerage profession. CBB is a founding member of the International Business Broker Association (IBBA), the largest business broker association in the world. Further, CBB is a founding member of the Texas Association of Business Brokers (TABB), the precursor and model used to form the IBBA and other business broker associations across the country.

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