Terry H. Monroe - Selling with Certainty: Straightforward Advice for Cashing In on the Full Value of Your Business

This book is based on true experiences. The names of people and businesses have been omitted to protect their privacy. This book is presented solely for educational and entertainment purposes. The author and publisher are not offering it as legal, accounting, or other professional services advice. Neither the author nor the publisher shall be held liable or responsible to any person or entity with respect to any loss or incidental or consequential damages caused or alleged to have been caused, directly or indirectly, by the information contained herein. Every business is different, and the advice and strategies contained herein may not be suitable for your situation. You should seek the services of a competent professional before you change the way you operate your business or initiate the purchase or sale of a business.

Published by Greenleaf Book Group Press

Austin, Texas

www.gbgpress.com

Copyright 2018 Clayton Investments, LLC

All rights reserved.

Thank you for purchasing an authorized edition of this book and for complying with copyright law. No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the copyright holder.

Distributed by Greenleaf Book Group

For ordering information or special discounts for bulk purchases, please contact Greenleaf Book Group at PO Box 91869, Austin, TX 78709, 512.891.6100.

Design and composition by Greenleaf Book Group

Cover design by Greenleaf Book Group

For permission to reproduce copyrighted material, grateful acknowledgment is made to the following sources:

From The Facts of Family Business from Forbes magazine, Forbes.com, July 31, 2013, Copyright 2013 by Forbes. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited.

Illustration with caption OK, Dan, so maybe I should have accepted that final offer.

Copyright by Michael H. Marks. Reproduced by permission of the artist.

Publisher's Cataloging-in-Publication data is available.

Print ISBN: 978-1-62634-536-2

eBook ISBN: 978-1-62634-537-9

Originally published as Cashing In on the Hidden Wealth of Your Business (9781532345210).

Part of the Tree Neutral program, which offsets the number of trees consumed in the production and printing of this book by taking proactive steps, such as planting trees in direct proportion to the number of trees used: www.treeneutral.com

Printed in the United States of America on acid-free paper

18 19 20 21 22 23 10 9 8 7 6 5 4 3 2 1

First Edition

Also by Terry H. Monroe

The Art of Buying and Selling a Convenience Store
The Art of Business Brokerage

TO ALL THE ENTREPRENEURS who have spent hours of hard work building their business, hiring employees, and supporting their families. I hope they will be able to reap the rewards for everything they have invested and toiled to achieve.

Contents

Introduction

IF YOU HAVE picked up this book, I commend you. I say this not because I want to sell more books but because it means you realize the importance of getting things right before selling your business. I am shocked by how many successful entrepreneurssmart folks whove devoted years to building their businessescan be so casual and sometimes downright dumb when it comes time to sell their businesses.

Many of these successful business owners dont take the time to educate themselves on what it takes to successfully sell a business. Instead, they treat it as if they were selling a piece of property or a vehicleor, worse yet, as if they were holding a yard sale. After years of being in business, often buying and selling items for their company, sometimes they assume that selling the business itself wont be any different. This mindset almost always leaves those entrepreneurs disappointed, frustrated, and with a lot less money in their pocket than they expected.

Ive seen this disappointment firsthand in my work as a business broker, having been involved in the sale of more than 500 businesses, and as a business owner owning 40 different businesses myself. And Ive learned from my own mistakes, some of which have cost me millions of dollars over the years.

What You Should Know before Selling

Knowing what to do before you sell your business is absolutely critical. Getting the business ready to sell, including making sure you have everything in place, is the most important part of the saleexcept for receiving the money for the transaction.

MARKET VALUATION

There are many items that need to be completed before a business can be sold, starting with a market valuation. How can you sell anything if you dont know what its worth? The answer is you cant; yet so many business owners proceed blindly with selling their business thinking they know what their business is worth, only to later realize they undervalued it and left an excessive amount of money on the table.

TAXES

What about your unseen partner, which so many people seem to forget about? I am talking about the Taxman and contending with his wide array of taxes. Chances are you will have to pay taxes on the sale of your business that you didnt even know existed. Remember, taxes are incurred when there is a transaction, and selling your business creates a transaction. So you must make sure you have investigated your tax situation before you decide to sell your business.

More than once I have been in a situation where a business owner wanted to sell their business, only to have them change their mind after they talked with their tax accountant. Why? Because they realized that after paying all the appropriate taxes after the sale, they wouldnt have enough money to live on. Instead, they were going to have to keep operating their business.

PERSONNEL AND BOOKKEEPING

If the taxes work out and you decide you can afford to sell, how do you handle your current business personnel? Having the right personnel will make a difference in what kind of value you can expect to receive. And it might determine whether you can exit at the time of the sale or if youll need to stay around to facilitate the sale of the business.

Profit and loss statements and well-kept books and records are extremely important for the successful sale of a business. Are your books and records in the proper order and prepared correctly to be shared with a buyer? Will they show the business in the most positive light, or are they in need of being corrected and reformatted? I was once helping sell a business in the $70 million range, and it took me more than a year just to get the companys books and records in order. The owners of the business told me after the first year I worked for them that while they still wanted to sell the business, they were not in a big hurry anymore. By helping them clean up their books, Id also helped them improve their business.

I had another situation where a business owner wanted to sell but held off because theyd just installed new computer software and said they wanted to wait before selling the business. The new software, however, caused problems and ended up messing up the companys books and records. The business owner waited too long to correct the issues with the software and ended up selling the business a few years later for $4 million less than what it had been worth when we first talked.