For many business owners, the idea of cashing in on many, many years of hard work in starting, growing and maintaining a successful business is quite an exciting proposition. When the time comes for you to consider selling your business, one of the last things on your mind may be your business’s preparedness for that sale. Your focus is likely on determining an agreeable purchase price, finding a buyer with whom you are comfortable, and considering whether you’d like to maintain a potential role with that buyer after the sale is complete. However, finding the right deal is only step one in a lengthy transaction process.
While the agreement on the terms of the deal is being created, a seller will often be faced with a time-consuming due diligence process. With private equity and other sophisticated buyers emerging within the small business and professional service business transaction markets, sellers are often faced with teams of specialists working as representatives for the buyer to conduct thorough financial, legal and administrative due diligence prior to the consummation of the deal. Those representatives will want to review every nook and cranny of your business. For the small business with only one or a few owners and shot-callers, the task of gathering requested documents and responding to a series of what often feels like never-ending questions during this process can become a second full-time job.
For this reason, we highly recommend that any business owners who are considering entertaining the idea of a sale of their business in the coming months or years take a few immediate steps to ease the burden down the road. First, it is important to locate and keep updated all of your corporate and financial records, as they will most certainly be requested during diligence. Next, it would be wise to loop in a team of trusted individuals within your organization – any number will help! – who can help act as a support team for you when the diligence period arrives. Finally, make sure that you discuss the idea of a sale with your professional advisors, including your accountant, attorneys and any business brokers or investment bankers you may have, prior to the sale process truly beginning, as they will be able to provide you with specific guidance.
At Katz Chwat, we have been proud to work with numerous businesses and their owners to facilitate, negotiate and consummate business transactions. If you or your client are considering beginning this process, or if you have any questions about this topic, please feel free to contact our office at (631) 683-8700.
Posted in: Estate Planning