With most business decisions there are risks, and the same applies to selling a business.
Some risks are obvious, others less so. Some people are more comfortable living with risk, others are more risk averse.
Typical self-made small business owners have become used to solving their own problems, often learning through experience on the job. Perhaps this is why many are reluctant to pay for specialist advice, particularly now that there’s so much information on the Internet.
Selling a business can be argued as a special case because, in theory, there should be payback on any expenditure. Because if specialist help increases the asking price then an owner gets their money back, and hopefully a lot more besides.
Or alternatively, this expenditure can be considered like an insurance policy. Protecting against downside risks, particularly if there’s an Asset sale where there could be future unforeseen liabilities against the previous owner, which only surface after the sale has been completed.
So it’s important for an owner to be honest with themselves about their capabilities, knowledge and experience. It's really helpful to make the business sale a team game by involving key, trusted members of staff, as well as specific external advice.
There are two obvious skillsets that are particularly welcome additions to a business sale team, namely, legal and financial. Perhaps these skills already exist in the business. Even so, a fresh outside perspective can be invaluable. It’s common for business owners to use suitably qualified Attorneys and Accountants on a periodic basis.
An Attorney gives reassurance when it comes to the legal detail, in particular that essential documentation, which grows in importance as the sale process reaches its climax with the signed Business Sale Agreement and Bill of Sale. An owner may be particularly vulnerable from a Do-it-Yourself approach if the buyer involves their own Attorney. Although involvement may start earlier in the process, an Attorney is useful for helping with response to a buyer’s Letter of Intent (or Term Sheet) to purchase the business.
Then there are legal considerations arising from Due Diligence which may impact the final Business Sale Agreement. And all those nuances depending on whether it’s an Asset sale or a Stock (share) sale. There’s a lot to think about, and it’s hard to escape the detail.
Talking of detail, how about those all-important numbers? Previous performance inevitably impacts on asking price. Whether calculated using a specialist valuation tool, various "rules of thumb", or from benchmark comparisons with similar advertised businesses. An Accountant can help with the valuation process, analysing business financial performance, and with presentation of the key facts, including clear graphical summaries to inform prospective buyers.
Where short term changes could enhance business value an Accountant is often best placed to calculate the implication of "What if" scenarios. Working through the options and facilitating choice by checking the financial implication for profit and cash flow of each option, or the combined effect of choosing more than one.
Tax liabilities arising from a business sale are best considered in advance as they are sure to impact negotiations for both parties. An Accountant well versed in tax law is a major asset starting, but not ending with, the type of sale, whether Asset or Stock. This can get really complex and so it’s not advisable for a business owner to tackle this as a novice.
There’s more contributions besides these from Lawyers and Accountants when selling a business, but of course this is chargeable time to be weighed in the balance of cost versus benefit.
To summarize, assembling a team with the right skills can pay important dividends when selling a business. External support that brings legal and accountancy skills to the table is normally very valuable. It’s prudent to budget for this cost in advance after specifying and agreeing specific roles and tasks.
A business owner may look beyond this to a personal finance adviser, business broker and perhaps a specialist(s) skilled in planning and implementing those particular change measures that increase business value in the short term.