Selling a Business

Selling a Business

Selling a Business

As an experienced buyer and seller of businesses, I offer business consulting and coaching to assist owners through the process of selling a business- before, during and after. Although you may not be ready to sell your business, it’s important to know what potential buyers look for.

Non-Commissioned Consultation – I Listen

The process of selling a business seems cut and dry when in fact it can be an emotional roller coaster for the inexperienced seller.   As an unbiased listener, I can ask the hard questions and coach you through the business sale process. Afterward, I can lend an ear and share my experience with post business integration and your transition from owner to employee.

What documentation do I need before I sell a business?

  • Accounting records including three to five years of financials – balance sheets and income statements; tax records.  Depending on the size of your business you may need to submit personal taxes as evidence of income.
  • Organizational records including all your corporate documents. This includes buy sell agreements, all asset contracts and leases, employment records, and insurance documents.  Even if you don’t plan to sell your business, update your corporate records on a regular basis, at least annually, and store them in a safe location.
  • Documentation of business processes including standard operating procedures, training records, quality control certifications and safety programs.

Preparing this information prior to pursuing a buyer will make selling a business less overwhelming. This is the very same information you need to become certified as a minority or woman owned business.   Annual certification of my WBE forced me to update regularly.

Selling a Business – Highlights of the Sale Process

Navigating the Letter of Intent (LOI) –  Knowing the true purpose of a “non-binding” letter of intent is important. Your signature means you’ve agreed to a price and financial terms of the sale. The signature allows the potential buyer to peek behind the curtains of your operation. A signed letter of intent opens the door to the next phase which is “due diligence”.

Due Diligence – This is an investigation into whether the business is what you say it is. Will they get what they are paying for? There is no guarantee your deal will close so use caution when sharing information.  Your willingness to share certain information during the due diligence period may severely affect the future operation of the business. Consult your attorney with questions and consider the following:

  • Withhold the names of your customers.  Black out the names of your customers to show only the sales revenue and costs. If the interested buyer is a competitor and they don’t buy your company, what prevents them from showing up at your best customer a year after “due diligence”?
  • Patent information – everything they need to know is available on-line.  There is no need for further detail.
  • Don’t demonstrate or share information about proprietary or secret company processes. I caution you against sharing this information at the beginning of due diligence.

Employment Contracts – Have your attorney negotiate your employment contract. However, information about your future job description, salary and terms of employment is your responsibility not the attorney’s. If your intention is to stay on with the company for a defined period of time consider the following:

  • Agree on the job description and attach it to the contract. Determine and confirm eligibility to participate in the new owner’s benefits.
  • Will you be entitled to raises, commissions and bonus programs during or after an earn out period?
  • Are you an at will employee? If you are dismissed without cause how will your compensation be paid out?
  • What are the terms of your non-compete? How long will it last after you leave? What are the geographical limitations? Will it automatically expire if you are dismissed? Are there other exclusions? Negotiate your non-compete terms.
  • Is this contract valid if the buyer you negotiated with is no longer in existence? Make sure your contract is valid in the event the buyer of your company is acquired by another.

Earn Outs – Business buyers use earn outs to assure a smooth financial and cultural transition. An owner should negotiate for achievable targets and have them clearly described in the letter of intent. Several examples follow.

  • Sales targets – some work in favor of the seller others in favor of the buyer. All should be reasonable and achievable.
    • Are they reasonable and within the context of historical data? Is there a minimum acceptable gross margin?
    • Is there a set time limit? x by year one; y by year two, etc., or all or nothing?
    • Is there an opportunity to increase the time limit and let the sales roll over?
    • Will the buyer agree to invest money in assets required to grow the business?
  • Customer Retention –  A customer retention target may be included if majority of your revenue is concentrated in a few clients,
    • Will the buyer agree to keep the sales force unchanged to ensure your ability to retain customers?
    • Will the buyer agree to existing customer terms at time of ownership change, e.g. special payment plans, delivery terms?

Transitioning from Owner to Employee


I offer coaching to “ex-owners” of small businesses who are attempting to integrate and understand a new corporate environment. Having an earn out or contract with the new owners necessitates your continued presence and leadership. Transitioning from owner to “executive employee” can be difficult for you and your employees.

Melding two organizational cultures is challenging work. Many acquisitions fail as a result of poor integration. In an ideal world a team from both companies comes together to work on the integration. Regardless of the acquisition size, spending time on the seemingly non-value-added integration project reaps financial rewards in the long run. Poor integration may result in low morale, significant employee turnover and lost revenue.

Coaching through the transition- owner to employee

As many business owners will attest: it’s lonely at the top. As a business owner it is possible to get together with your peers through CEO forums and other owner groups.

  • As a new employee however, you are set apart as an “ex-owner” and quickly learn there are few “peers” in this new environment.
  • There are few if any outside clubs or peer groups and very little information available specifically addressing the topic of transitioning from owner to employee.

This information is based on my experiences which may not be typical.

Helpful links: 

Small Business Administration –

NFIB How to tell your employees after the sale-