Retire well by planning business sale carefully

  • By Paul Keller Guest Columnist
  • Tuesday, September 2, 2008 1:29pm

Washington state is home to more than 500,000 businesses, according to the U.S. Small Business Administration. Of those, more than 150,000 are located in the greater Puget Sound area, and it is estimated that less than 50 percent have had a change in ownership/control in the last 15 years. For many of these business owners, developing and executing a successful exit strategy is the key to retirement.

As 80 million baby boomers around the country move toward retirement, more than 7 million business owners are expected to exit their businesses over the next 10 to 15 years. Some fortunate business owners have family members or employees who are willing and able to step in and take over the operation. For many others, the only way to realize the value of the company is to sell it.

Business owners with profitable companies and the desire to sell always can find demand in the marketplace. Buyers are particularly attracted to manufacturing and distribution companies with their own proprietary/branded products, strong gross margins, loyal customers and experienced employees. But even owners of the most attractive businesses are advised to follow these steps in order to maximize the benefits of a sale:

Start planning early. The decision to sell can have a profound impact on your financial position, career and lifestyle. Moreover, consummating a sale requires a significant investment of time and energy. Planning the sale in advance helps ensure that the sale occurs at the right time. The goal should be to sell when the market is generally favorable, the business is growing, the employee base and/or management team is stable and — perhaps most importantly — when you are ready based on your personal and financial objectives.

Maintain confidentiality. It is generally important that employees, competitors and customers not be aware of the sale until it is completed. Consequently, the sale process should be run in a manner that minimizes disruption to the company and protects your confidential information.

Package the business properly. Invest the time to develop a high-quality, comprehensive document that describes your business, its background and its future potential. At the same time, clearly disclose any negative issues that are involved in the business. The disclosure will reduce litigation risks, add to your credibility with potential buyers and save time by eliminating those who are unwilling to accept the realities of the business.

Proactively market to prospective buyers. The goal in the marketing process is to engage multiple qualified buyers. Proactively (but confidentially) contact prospective buyers who have the skills, aspirations and resources to grow your business substantially. Recognize that buyers who fit this profile may be willing to pay more than others; consequently, the buyer that may have approached you directly might not be the ideal acquirer.

Assemble a strong team. Your accountant and your attorney will play key roles, and their expertise will be invaluable in consummating a successful transaction and reducing your risks. You also may benefit from the assistance of an experienced intermediary or merger and acquisition (M&A) firm that specializes in selling privately owned businesses. A successful M&A firm can manage the sale process while you remain focused on running the business. Before hiring an M&A firm, make certain that they do not charge up-front fees, that they have a litigation-free track record and that you can work with them closely and successfully over several months.

The successful sale of a business does not happen overnight, and it does not happen by accident. Do your homework, plan ahead and work with the right team in order to realize a successful sale and an enjoyable retirement.

Paul Keller is a partner in ASG, a regional merger and acquisition firm specializing in the sale of privately owned manufacturing, distribution and service businesses. The firm conducts seminars to help business owners learn more about how to sell their businesses. Call Keller at 425-450-4800, send an e-mail to paul@asgpartners.com or visit www.asgpartners.com to learn more.

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