First Steps in Listing Your Business
We’ve talked in the past about broad reasons why we might (and might not) take your listing, so today we’re going to get a bit more granular and talk about what that process of listing looks like.
I Want to Sell!
We get it! You’re ready to move on with your life and once you’ve told us you want to sell, you might already have a mental countdown clock started. But you shouldn’t start that clock, because we haven’t listed the business yet, and when we do, it’s going to take an average of 6-9 months to sell. So, we appreciate the enthusiasm but we need a few things first!
Key Information
We can’t price and promote your business without hard data. Most times that hard data is going to come from the last three years of tax returns along with the financial statements to substantiate and corroborate those returns.
We’re going to need a bit of time with you and your accountant to understand some charges, as we haven’t worked side-by-side with you in the business for years and may not understand why certain things are classified the way they are.
Not Auditors
We aren’t the IRS and we aren’t interested in passing judgment or scolding you for where expenses have been classified. What matters to us is getting to a clear number of SDE that will allow us to move towards a proper price for your business. That said, we’ve seen some, shall we say, creative interpretations, including:
- Vet visits for a dog classified as “security” expenses
- Cosmetic surgery for a spouse classified as “building improvements”
- A lake house used once in five years for a company retreat as an active company asset
Banks can be leery of excessive addbacks, but that doesn’t mean they won’t work with companies that have a lot of them. But without being clear as to what expenses are legitimate addbacks, we can’t get a true value for your business.
Seller Disclosure Statement
So we’ve gotten all the key paperwork we need to get pricing, now we need to cover anything the numbers can’t tell us, which can include:
- Current or future lawsuits/legal actions against the business
- lease/real estate situation (if applicable)
- Upcoming changes (key employee or major customer leaving)
This information completes the snapshot we will come up with called the Confidential Business Review (CBR).
Why Confidentiality Matters
Confidentiality is perhaps an important part of a business sale in general, but it’s particularly important during the listing process. Don’t tell employees what is in the works or you may have an exodus that leaves you with a shell of a business.
Going to Market
Armed with all this information, we will put together marketing material to showcase your business in various formats and on various platforms, and to do so confidentially. We asked you to keep things confidential, and we follow our own advice. We even keep that confidentiality sometimes long after a sale closes, referring in general terms to a business in a generic industry in a generic region.
That countdown clock we referred to above? Now that the business is listed, you’re free to start it, but make sure you do with expectations that have been tempered by a discussion with us, not a timeframe you’ve manufactured in your head. You may have sold a business before, but you’ve never sold this business, in this market, before.
Did this article make you realize you need to get a few ducks in a row before you can even list your business? We’d love to help you with those ducks! Give us a call.
