Selling a Business – Seller’s Guide

How to use acts as a meeting place for buyers and sellers.  Sellers can use this web site to list their business for sale.  Communication with prospective buyers takes place through an email address on our domain which is forwarded automatically to your email address.  In other words, only when you are ready to meet with the buyer, do you need to supply your actual contact details to the buyer.  This ensures confidentiality and screening of buyers. Any negotiations and dealings are directly between buyer and seller. The businesses offered for sale on this site are subject to the confirmation by the seller and is not offered for sale by

Search Engine Optimization
Listing your business with gives you exposure to thousands of interested buyers worldwide. has been optimised so that it appears near the top of search results with search engines like Google, Bing, Ananzi and Yahoo etc. Search engines regularly index so users worldwide will find your business while searching. Indexing new listings takes time, and normally after two to four weeks your business will appear favourably in searching: ie. near the top of the search results.

Who should sell your business?
Only one person knows your business inside out — and that is you, the owner. You have all the knowledge about your company that a buyer requires. With the sufficient preparation on your part, along with counsel from your attorney and accountant, you can sell your business. Remember these three important points in selling your business:

1. Confidentiality is a must and is something within your control – (Recommended that you insist on a confidentiality agreement when meeting with a prospective buyer);
2. Determine the proper price for your business; and
3. Have a sufficient number of qualified buyers. The quality of the buyers, specifically their ability to offer the desired price, is important.

Business owners can negotiate with the buyers themselves, thus maintaining control over the selling process, and saving commissions which can average 10 percent of the selling price.

As a seller, what should you know about prospective buyers?
You will need to know the amount of cash the buyer has available, the amount of their open credit line, and the price range of the business they wish to buy. Also, know their time table for buying. You will need their banking references, business references and personal references. If the buyer is not qualified, you are under no obligation to continue corresponding with them. If the buyer is qualified, then you proceed with a personal meeting.

What will a buyer look for in your business?
Expect a diligent buyer to subject your business to a thorough examination. This may include scrutiny of:

  • Your marketing and operations
  • Management structure
  • Customer and market base
  • Financial statements, tax returns, payroll records, etc.
  • Earnings (profit before taxes) for the past three to five years, as well as your net worth.
  • Assets of your business and — facilities, equipment/vehicles, inventories and lease-hold improvements.
  • Your legal status — pending or potential litigation and lease agreements.
  • Employment contracts
  • Corporate minutes, and your patents, licenses, permits and franchise agreements.
  • Your attorney and accountant can help you with some of this information. You would want to disclose this information only after you have ensured that the buyer is qualified and he has signed a non-disclosure agreement.

What steps will you go through in the selling process?
The time required to sell a business, from the decision phase until the completion of the transaction, may be months. The first step is to prepare all significant documents. Next, make initial contact and pre-screen the prospective buyer. Price and terms should not be discussed here. Third, start the negotiations and deal structuring. At this time you can discuss price and terms. Fourth, after all material issues have been resolved and an agreement has been reached on price and terms, get a letter of intent and an earnest money check. The purchase agreement and closing aspects of the sale should be reviewed by your attorney and CPA.

Enhancing the value of your business
The value of just about any business can be enhanced through some fairly easy steps, some of which are outlined below. By making these adjustments to prepare your company for sale, you will make the process go more quickly and smoothly. Here are some steps that you can take now to maximise the value of your company and assure a quick and successful sale:

Financial Issues
Start Preparing Financial Statements for Selling Purposes

Financials prepared for tax purposes are designed to show income as low as is possible within the confines of tax law. Talk to your accountant about possible modifications in your accounting methods that may work to your advantage when it comes to selling your company.

Employee Issues
Personnel Changes

Buyers are afraid that key employees might leave after they take over the company. Talk with key employees. If they are prepared to remain with the company through the transition, fine. If they are thinking of leaving, it is better that they leave sooner than later. This will allow ample time to train a replacement who will remain with the company through a transition.

Examine Retirement, Profit Sharing, and Pension Plans
It might be advantageous to change the characteristic or terminate the plan well before selling the company. Similarly, if you are the trustee and or administrator of a pension or profit sharing plan, now is the time to consider turning these functions over to an outside administrator. Consult your lawyer, or retirement plan advisor.

Contractual Issues
Examine Contracts

Take a close look at any contracts you have with suppliers or customers. Those that would be beneficial to a new owner should be kept and standard if possible. However, if there are contracts that you are renewing because of habit, or for other reasons that are not financially prudent, now is the time to do something about them. Contracts that are harmful to a buyer will certainly lower the value of your company.

Review your Real Estate Lease(s)
If location is important to your business, make sure that a buyer will be able to stay in that location for a reasonable period of time. Above all, make sure that your lease is not set to expire and be re-negotiated while you are actively selling the company. Pay specific attention to renewal options. Renewal options are generally better than long commitments because they give the buyer maximum flexibility to stay put or to move. If possible, get a lease that can be assigned to a buyer at your option.

Examine Equipment Leases
If you are leasing equipment and the lease will remain in place after the sale, look at the rationale of the lease(s) from the perceptive of the buyer. If a lease will have the effect of saddling the buyer with an interest rate well above prevailing rates and any tax advantages have already accrued to you, the lease may hurt the value of your firm. Your accountant can advise you here.

Structural Issues
Formalise Your Records

Suppose your policy is to give customers terms of net 30 days. Like most business owners you probably make exceptions to your policies. Make sure that you apply your policies and document any exceptions carefully – you do not want to surprise the new owner!

Systemise Operations
Many small companies rely on a mix of clearly documented procedures and undocumented practices.  Your company will be more attractive if procedures are clearly systematised and documented so that a competent manager can take over with minimal training. You need procedure manuals. Make sure the procedures are tested and refined before the sale.

Separate Real Estate Divisions
It sometimes makes sense to own real estate as a company asset. But when it comes time to sell, including it as part of a business sale can increase the complexity of the sale and make a business less attractive. Sophisticated buyers like to transact real estate separately from the business itself. Also, if real estate is separate, you can start showing rental to the real estate owner as a regular line item expense for the company, making it more clear and acceptable for a buyer to assume the expense.

Ownership Structure
If you are operating as a sole proprietorship or a partnership now may be a good time to incorporate for two reasons. First, it is better to have the corporation liable for payables and other debts. Otherwise you might find yourself responsible for the liabilities that he agreed to take over. Secondly, a corporation provides a clean vehicle for transferring a company in part rather than in whole.

Entrepreneurs are not known for their fastidiousness in keeping records and documentation. While updating corporate bylaws, minutes, and the like may be way down on your list of priorities, the buyer and his laywer will not be so casual about them. Talk to your lawyer about appropriate updates.

Review Terms and Structure of Sale
The terms are as important as the price. Decide the range of owner financing that you will consider and the degree of security you will demand. Remain flexible though, so as to not limit your options. A buyer may present you with a reasonable but unexpected financing package. There are as many ways to structure financing as there are businesses for sale. You can sell all of the business or part of the business. You might sell your interest in a corporation to another corporation or an individual. Or, your corporation may sell its assets. It is not unusual for a business owner to sell the business but retain ownership of the receivables for purposes of security. There are even instances where a business is essentially leased with an option to purchase. The appropriate structure can help you get what you want from the deal, it can protect you legally and financially, and it can bring a deal to fruition that would otherwise never happen.