Issues in a Short-Term Exit Strategy

Are you thinking of selling your business within the next year? Gleaned from our professional experience, here are three areas for you to consider: people, documents and process.

Who are the People I Need?

The savvy owner will gather a team of professionals to assist in this process: a business broker, accountant and attorney. Why? Preparing a business for sale and following the process to completion can be a full-time job. An owner needs to continue running his/her company; redirecting energy towards selling the company is a recipe for disaster. A professional business broker has the expertise and experience to: prepare and market your business confidentially (without your employees, vendors, customers and competition knowing); bring qualified buyers to the table; keep the selling process on track; and help you avoid costly pitfalls. As team members, the accountant and attorney can offer their expertise in several areas: interpreting financial data, deal structure, tax implications, and the creation of closing documents.

What Documents Will I Need?

Providing clear and accurate documents for a potential buyer is key to a successful business transfer. The necessary documents include:

    • Financial Statements: 3-5 years P/L Statements and recent Balance Sheet.
    • Interim P&L’s since latest year-end.
    • 36 months (plus interim period) of monthly sales/revenue figures.
    • Tax Returns: 3-5 years of tax returns. Buyers want to compare tax returns to financials for accuracy. Later in the process, lending institutions will also need these records.
    • Historical Data: A concise company history including moves, expansions of facilities, territory, products and services.
    • Current Data: Employee chart; benefit package; products, services; operations; marketing; lease and facilities information; key contracts; buy/sell agreements; website.
    • Equipment List: small and large equipment (include serial, model numbers); vehicles; list of leased equipment and lease copies; furniture, fixtures.
    • Business Plans: budget projections, revenue/cash flow projections
    • Printed Material: Brochures, catalogues, photographs.

All of these documents are gathered by the broker into a Confidential Memorandum. This Memorandum will be the primary tool for a prospective buyer to view and study your company (note: this Memorandum is only given to buyers who are qualified and have executed a non-disclosure agreement).

What Is the Process?

  • Determine why you are selling. The reason should be apparent…retirement, burn-out, another interest or venture, health questions, etc. If the reason is not obvious, go no further. Until you are sure you want to sell, don’t. “I’d sell today for the right price” is not a good enough reason. Determining your reason will determine the success of your sale.
  • Gather your team. You will spend a lot of time in the beginning process with your broker—every minute of up-front preparation time will be worth several hours as you approach closing day. Your broker will ensure that all the members of your team work cohesively.
  • Gather the necessary documents.
  • Determine your buyer profile. An individual? A corporation? A strategic buyer? An equity group? Your profile may point to one of your vendors, clients or competitors.
  • Review and approve the Confidential Memorandum and marketing plan.
  • Do “spring housecleaning” throughout your facility. Separate out-of-date inventory
    from current inventory. Paint, wash windows; clean shelves, closets, workspaces; trim,
    replace overgrown shrubbery. A neat facility shows you care about your business.
  • Continue business as usual. Maintain normal advertising and customer relations; compliment and express gratitude toward employees, maintain normal inventory levels.
  • Welcome potential buyers warmly. Hospitality, shown by the owner, is key to positive buyer interviews.

Negotiations and Closing

Negotiations can be a long, drawn-out process. It is important for all parties to remember that unless the deal is win-win, there is no deal. Clear, honest communication is key; making assumptions about the other party’s motives can quickly derail a deal. Some sellers prefer to deal with negotiations through the broker; other sellers prefer face-to-face encounters with the buyer. There is an ebb and flow to every negotiation—constancy and patience are all-important. A flexible stance will go a long way in maintaining trust and good-will. In many deals, Closing Day is the beginning of a relationship between buyer and seller… don’t allow the negotiation process to damage this relationship.


Selling a business takes patience, insight, expertise and diligent preparation. Working with a team of professionals can insure a successful sale and a positive transition for the new owner.

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