Seller / Buyer – Two Sides of the Same Coin

The radio interview initially centered around a discussion of the impending flood of businesses that will be for sale resulting from “Baby Boomers” seeking to exit their business.  But then the questions were asked, “What does this mean for a person who wants to get into business?”  “How can they determine the good from the not so good, a good deal from a bad and what is the right value of the business?”  How would you answer that?

B2B CFO has recently released The Exit Strategy Handbook, The best guide for Selling Your Business.  Although targeted for the person who contemplating exiting their business, it dawned on me that it is the answer to the questions asked on the radio interview.  The very things that business owners need to complete in order to prepare their business for a successful sale are also the things that a potential buyer will want to review.  Just as the seller needs to make a determination of the value of the business, the buyer needs to be able to assess that valuation and determine for him or her self whether the valuation is accurate or need further adjustment.  Just as the seller need to assemble a “Success Team” comprised of professionals from a wide range of professions, the buyer also needs to gather a number of professionals that can assist with the evaluation of the various documents provided by the seller.

The Exit Strategy Handbook provides extensive checklists for eighteen business segments containing over 200 items that a seller needs to address and a sophisticated buy needs to request.  A partial list of categories includes general information, management and employees, product or service, customers, vendors, insurance, financial statements, taxes and others.  Examples of check list items for the Financial Statements and Overall Financial Review include: “Provide copies of monthly internal financial reports for the last three years and year-to-date.”  Provide copies of the budget financial statements & management projected financial statements for the last three years and the current year.”  “Provide copies of the Company’s latest business plan/strategic plan, if prepared.”  “Provide (a) written description of (the) budget process.”  “Provide examples/copies of any reports management reviews on a daily, weekly, monthly or annual basis to understand the business.

While invaluable to a business owner who is considering stepping away from their business, The Exit Strategy Handbook is an essential tool for preparing a potential buyer for the the arduous process of purchasing a business.

 

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