• Making some decisions about add-backs - These are expenses that will no longer be in existence once you sell . So , for instance , owners may have company cars and car insurance being paid through their business . These are part of the value they get as owners of the company . “ They can either add back the value of these expenses when they ’ re negotiating with the buyer , or just stop taking them . Stopping these deductions will increase their profits and negates having to defend them when they ’ re negotiating the deal . One way or another , it ’ s a good idea to make a list of these expenses and decide how you want to treat them when you value the company ,” advises Cvern .
• Listing non-recurring negative items – “ You should also account for one-time non-recurring items that have negatively impacted your earnings ,” advises Cvern . “ For example , perhaps your company was involved in a one-time extraordinary lawsuit , and you had legal bills of $ 50,000 that impacted that year ’ s earnings . Or you took a hit because one of your larger customers went bankrupt and owed you a substantial amount . Or you decided to quit a certain line of business and it cost your company money to shut down operations . Adding these amounts back into your earnings will provide a healthier and truer picture of what your company actually earned for the period .”
• Gathering important documents – “ Make sure you gather key documents before you start the process ,” says Cvern . “ It ’ s an administrative nightmare when you sell a company because the buyer is going to want every piece of information about your company . It ’ s better if you gather these documents in advance so you ’ re not looking for them during the sale cycle , while you ’ re also trying to run your business .” Typical documents include , but are not limited to , all leases , financial statements , large customer contracts , employee agreements , corporate documentation , banking information , detailed listing of physical and intangible assets and a listing of your top 10 customers showing revenues and gross margin by account .
LINE UP YOUR ADVISORS
Selling a business is stressful and certainly not something most business owners have proficiency in . Cvern advises bringing in advisors who have experience in this area . These include :
• Business Broker – “ You should have somebody who understands the process of selling a business ,” he advises . “ Most buyers , especially private equity , buy companies all day long . You only know what you know about running your business . Selling a business is not what you do . You need a professional to help you . Business brokers will generally take anywhere from 3 to 5 % of your proceeds and a lot of people aren ’ t thrilled about doing that . But it ’ s worth it . You can cost yourself a lot more than that by not being properly represented .”
• Attorney – “ Reach out to a lawyer who has represented sellers before ,” says Cvern . “ You don ’ t want to use a general lawyer . You want someone who specializes in mergers and acquisitions . Your business broker can help you connect with the right individual / firm .”
• Spouse and children - Make sure your family understands the process that you ’ ll be going through . Your business may be multi-generational . Or your spouse might part of it , as well as other family members . The better you communicate openly and honestly with your family , the better the process will go . You want and need their buy-in .
• Management – “ Somewhere along the process , folks that work for you will figure out that your business is for sale ,” Cvern points out . “ You need to determine where along the way you will tell key individuals about the process . This can be a great outcome for managers in terms of financial rewards and contractual benefits . The more important a manager is to your business , the greater they will have an impact on a sale , especially if you are looking to exit the business quickly . You don ’ t want them spooked by a sale . You need to make sure they understand that they will benefit as well . Having hard documentation showing how they will benefit will go a long way .”
Selling a business is not for the faint of heart , but Cvern says preparing for a sale well before you start the process can take away some of the stress . CLDA
summer 2023 I customized logistics & delivery Magazine 57