Advisers key to successful sale of a business

You've weighed the what-will-I-do-with-my-spare-time and how-long-will-I-need-money issues of selling your company, and it's still time to go.

Now what? Get the people, and then the numbers, right?

Attorney Ray Horn says to "surround (yourself) with a competent group of advisers" that includes a lawyer who specializes in business transactions.

Horn happens to be a transaction attorney at Meltzer, Purtill & Stelle LLC, a Schaumburg-based law firm, but his advice to put a transactions-savvy lawyer on your team is not as self-serving as it seems. Like patent filings and estate plans, selling a business is filled with legal nuances that could be costly if missed.

The attorney, Horn says, should be involved early enough to "review the engagement letter (you sign with the broker), develop the confidentiality agreement (prospective buyers must sign), organize due-diligence procedures, refine the letter of intent" and then handle the closing.

An experienced transaction attorney can help even if you sell the business internally, to your management team. Selling to your own people seems like a no-brainer, but, Horn says, "The problem is that there is a tendency for the owner to not protect yourself" precisely because the sale is inside.

"You let some things go that become big risk factors."

Regardless of who buys, it's going to take time - probably more than you expect - to sell your business.

Business owners "tend to underestimate how long the process will take," says Linda Purcell, president of Purcell Associates LLC, a Palatine business broker.

Today's typical sales cycle is 10-11 months, Purcell says, but that time frame can extend quickly. Suppose, she says as an example, "You tell me that one customer accounts for 65 percent of your sales when I ask about customer concentration," and that there's really "only one vendor" who supplies what you sell.

"I'll say you'll need two to three years to broaden the business' base" to make it attractive to buyers, Purcell says.

Making a business attractive often gets to such seemingly mundane things as painting the lobby, swabbing the bathroom floors and cleaning up food-splattered walls in the lunchroom.

In addition to a clean balance sheet, "The business has to show well physically," explains John Meyers, a business broker at Sunbelt Business Brokers, Chicago.

Meyers, who once sold his own business, a Lake Bluff printing company, is about more than paint brushes and scrubbing, however:

• Be realistic about your selling price, Meyers advises. If a qualified business valuation expert says your business is worth $400,000, it's probably not going to fetch the $1 million you had in your mind.

• Understand that a seller's note is part of the deal today. Sometimes, Meyers says, "The seller takes the whole note."

• If it's time to replace aging equipment, lease rather than buy. "Buyers will always pick up a lease," Meyers says.

Questions, comments to Jim Kendall, jkendall@ 121MarketingResources.com.

© 2008 121 Marketing Resources, Inc.