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"What is my business worth?" This is inevitably the first question that is always asked when a business owner starts to consider the possibility of selling. Business owners often turn to a Business Broker or Business Appraiser for an answer to this question. However, before you do this, consider, "Would I buy my business?" An honest assessment is an important part of the valuation and selling process. Potential buyers have their favorite question too, "Why are you selling?" Most business owners sell for common reasons, retirement, illness and other business interest. Owners who are looking to sell for other reasons such as the business is losing money, or has a hidden problem such as a hazardous waste issue, will always be "discovered" during due diligence, resulting in a bail out or a significantly reduced offer. Getting to sold and getting the best market value for you business requires some preliminary work. Business owners should be able to account for each dollar as it flows into an out of the business. In a cash business, skimming from the register and not reporting it is fraud, and you will not be able to prove that income, thereby reducing the value of your business.

As you consider the possibility of selling, you should gather the following information:

I. 3 to 5 years of P&L (Profit and Loss) Statements
II. Income tax returns for the business
III. Receipts, Merchant Account Statements, Bank Statements
IV. List of all fixtures and equipment
V. Lease documents for the premises, equipment and furniture
VI. List of loans with total due, payments and terms
VII. Inventory reports

Shoeboxes are for shoes, not piles of paperwork. If necessary, take the time to organize everything in a clear and organized manner allowing for easy review. Remember confusion is not something you want potential buyers to experience. It applicable, it pays to have outside professional help prepare your documentation. By putting together a nice package that is current with YTD financials it is easy for brokers and appraisers to arrive at a value for your business. Values are most often determined by taking a multiple of the net cash flow. To learn more review the "What is my business worth?"

Always seek the advice of a Certified Public Accountant and/or Attorney when considering buying or selling a business.

10 Tips for a Successful Sale

1. Sellers should find out the loan value of the fixtures, equipment and machinery prior to a sale. Many buyers will count on using it for loan or collateral purposes. No one wants to find out at the last minute that the value of the machinery won't support the debt needed to put the deal together.

2. Sellers should resolve all litigation and environmental issues before putting the company on the market.

3. Sellers should be flexible about any real estate involved. Most buyers want to invest in the business, and real estate usually doesn't make money for an operating company.

4. Sellers should be prepared to accept lower valuation multiples for lack of management depth, regional versus national distribution, and a reliance on just a few large customers.

5. If a buyer indicates that he or she will be submitting a Letter of Intent, or even a Term Sheet, the seller should inform them up-front what is to be included:

• Price and terms
• What assets and liabilities are to be assumed, if it is to be an asset purchase
• Lease or purchase of any real estate involved
• What contracts and warranties are to be assumed
• Schedule for due diligence and closing
• What employee contracts and/or severance agreements the buyer will be responsible for

• Improve profitability by cutting costs
• Restructure debt
• Limit owner's compensation
• Fully fund company pension plan
• Seek the advice of a consultant
• Improve the management team
• Upgrade computer systems

• Do have all of your business documentation ready. Everything starts with it.
• Don't underestimate the value of your business. Owners of privately held businesses usually minimize profits to lower taxes. The financial statements may not reflect the real value of the business.
• Don't overprice your business. The right buyer who is willing to pay the right price may not even want to consider your business because the price is way out of line.
• Do offer as favorable terms as you can. Buyers, even good ones, want to leverage the sale as much as possible.
• Don't use a "magic" formula to value your business. Your business is unique, different from every other business out there.
• Don't wait too long to sell. The best time to sell is when business is good.
• Don't wait until poor health or a downturn occurs - sell from strength!
• Do allow at least six months to sell your business. The larger the business, the more time you should allow.
• Do use a business broker. They can take the mystery out of determining the selling price, prepare a marketing plan of action to maximize the selling price, handle all of the details, and leave you to do what you do best -- continue to run your business.

• Three years' profit and loss statements
• Federal Income tax returns for the business
• List of fixtures and equipment
• The lease and lease-related documents
• A list of the loans against the business (amounts and payment schedule)
• Copies of any equipment leases
• A copy of the franchise agreement, if applicable
• An approximate amount of the inventory on hand, if applicable
• The names of any outside advisors