How To Make The Best Deal When Buying Or Selling A Business
By Max Kleynburd
From the "You're the Boss" Section of The New York Times
As Accountants and small business Advisors, we're often asked for input from clients considering buying or selling a business. As you make this important decision, the most crucial aspect is to do your homework. Having all the facts is often the difference between getting a great deal and ending up with a lemon.
When you decide to list your business for sale, or if you're a buyer and find a business that is of interest to you, the key is to come to the negotiating table with an objective perspective on what's at hand.
If you're a buyer, think strategically and soberly about the logistics of running the purchased business. Think practically, obtain a clear financial picture of the business you're considering, and most importantly know the value of what you're buying.
If you're a seller, it often helps to remove the emotional factor our of the equation. It's not easy to let go, but now is the time to maximize the return on your investment and years of hard work.
Start by doing your homework. Your job is to show the buyer the value of your business. Begin by evaluating the assets that your business has to offer. Besides the evident fixed assets, most businesses have the intangible assets that perhaps can be even more valuable than the fixed - any trademarks, patents, you unique value proposition to the customers, even brand and name recognition, and market awareness are things to consider.
Also take the time and effort to prepare a pro forma Income Statement for the buyer -- a statement where your company's discretionary spending is clearly annotated and separated from the necessary and ordinary expenditures that are required for operation.
Keep in mind that in today's economy, many deals aren't as cut-and-dry as they were a few years ago. Many buyers and sellers are finding ways to creatively structure their sales. The best deal is one where both parties walk out as winners.