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by Daily Commercial News last update:Jul 20, 2006

Once business owners make the decision to sell their business, there are three distinct stages involved in the selling process.

Investment Corner

Once business owners make the decision to sell their business, there are three distinct stages involved in the selling process.

The First Stage

The first stage in a proactive business sale is preparation and planning. Take the time to understand the full value of your business and implement any value enhancements. At this stage you should also be aware of any possible impediments to selling the business and address them if reasonable.

The Second Stage

Once the owners/shareholders decide to sell the business, and the business has been prepared for sale, the second stage is the development of a marketing plan. How will you find and attract good quality buyers — buyers that have the motivation to complete a deal, and have financial and management capabilities?

Selling a business is often confused with selling real estate because a real estate licence entitles one to sell businesses. Business owners do not want a “for sale” sign in the window, nor do they want every real estate agent or the public to know they are for sale. Public knowledge could impact customers, suppliers and employees adversely.

There are some exceptions where confidentiality is not so critical and a business can be mass marketed. Franchises would be one example. Retail, such as pizza shops would not be overly concerned if their customers knew they were for sale. However, for most customers of small privately-owned construction firms, hearing that their supplier was for sale could affect their willingness to continue doing business with that firm. The development of a marketing plan would answer questions like:

— Can we advertise the business for sale?

— How will you advertise and where?

— If we can’t advertise, how can we find buyers?

— How can confidentiality be maintained?

— Can we target specific buyers and how?

— Where would the buyer come from — local, national or international?

— What information do we need to provide buyers for the company?

— What “sales tools” will need to be developed to showcase the business?

— What price do we put on the business?

The Third Stage

Once the marketing plan is developed then the third stage begins — implementation. In other words, this is putting the plan into action and includes:

— Approaching targeted prospective buyers.

— Placing ads (if appropriate).

— Answering inquiries about the business.

— Interviewing buyers.

— Providing tours and a site visit.

— Reviewing letters of intent.

— Negotiating price, terms, structure, conditions, etc.

— Assisting with due diligence agreements.

— Closing the deal, etc.

This list is an oversimplification of the third stage as it typically takes one to one and a half years to sell a mid-market, private business. On your own, you will likely deal with many buyer prospects that initially seem interested but will back off at various points in their review. It is not uncommon to talk to hundreds of prospective buyers before a satisfactory one is found.

It is also very rare to undertake most or all of the above without assistance from your professional advisors — lawyer, accountant, intermediary, etc. The time you spend in the planning and preparation stages will have a lot to do with how much you will require your professionals in the final stages of the selling process.

While it may be possible that the right buyer comes along out of the blue and offers you the right price at the right time, it is more common that a successful sale takes place when the above three stage are followed: 1) preparation; 2) marketing planning; and 3) implementation.

Doug Robbins is president of Robbinex Inc. specialists in the sale of privately-owned businesses. Doug may be reached at 1-888-ROBBINEX or www.robbinex.com

last update:Jul 20, 2006

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