There’s no easy way to sell a business. It takes a tremendous amount of communication, self-reflection, and above all else, planning. No one knows that better than Terri Krivosha.

If selling a business is an art, Terri Krivosha is one heck of a virtuoso. Terri is a strategic business attorney from Maslon LLP, who specializes in helping entrepreneurial and dynamic businesses achieve success at any stage of growth and development. She has a simple message for every business owner: Know your business’s exit strategy before you start.

It’s a principle that Terri has shared with clients across many industries, including consumer products, manufacturing and technology. It’s also a major theme in her book, Founding a Startup: What You Need to Know.

Terri’s wealth of knowledge is valuable for any business owner, whether you’re just getting starting or heading towards the finish line. Her insights are crucial for building a successful business, and coming out on the other side prepared, proud and prosperous.

Establish Your End Goal Before Starting
Especially for small businesses, it’s important to think about the end of the road from the moment you step on it.

This is best achieved by establishing your long-term goals in writing, so you can always refer back to them. Are you going to eventually leave the business for your children? Are you going to scale it and sell? Also include the factors that led you to your decision.

Why the forethought? Because preparing for your exit strategy throughout your ownership will be much easier than scrambling at the end, especially if you plan to sell.

“It’s a matter of planning,”  Terri says. “Business owners who go in with a clear end goal in mind and work towards it throughout their entire tenure are that much more likely to get there.”

Six Keys for Making Your Business Sale-Ready
1. Get your accounting in order – The primary consideration for buyers is how much money they stand to make off your company.  The only way to deliver this information is to show them the numbers. Start by collecting your historical statements so you can paint an accurate picture of your business’s financial history.

Historical data is important, but for a buyer, it’s your company’s future that matters most. That’s why most, if not all, buyers will request a five-year projection of your business’s financial outlook.

To create a projection, turn to a strategic financial expert. They’ll draw on your historical numbers and allocate risk to formulate an accurate projection.

Finally, you must be able to call back your finances to show your buyers the expenses they’ll incur after you depart. Create an adjusted income statement and identify the areas where you can soften expenses.

2. Protect your intellectual property –  The last thing you want to do is arrive at the negotiating table only to find that you’ve violated a trademark or that your packaging hasn’t been properly copyrighted. “I often see this especially regarding a company’s name,”  Terri says. “They dig a little deeper only to find that their name – or part of their name – infringes on an existing trademark.”

Planning ahead and protecting your intellectual property will enhance the value of your business. This also includes ensuring all employees have signed confidentiality agreements and non-disclosures.

3. Establish a leadership team – Making your business less about you and more about the company is essential for attracting a better offer. After all, buyers are investing in the business, not in its owner.

Establishing a leadership team is an important step in this direction. By default, you’ll always want to include a lawyer and a strategic accountant. Depending on the size of your business, you may want to include a broker as well.

Past those roles, diversity of thought and knowledge is key for comprising the rest of your team. Assess your employees’ strengths and weaknesses, and appoint strong, confident personnel who will challenge each other with different viewpoints.

“When it comes to a leadership team, groupthink is a killer,”  Terri adds. “Healthy discourse allows you to approach a situation from multiple angles, leading to the most well thought-out courses of action.”

You may also want to select members with specific expertise based on the nature of your business. For example, if your products or services pose potential environmental risks, including an environmental engineer would probably be a good idea. Remember, a leadership team isn’t built overnight. It usually takes about five years to assemble the team.

My advice? The earlier you start thinking about it, the better.

4. Identify the inflection point – If you think of a bell curve of the economy, the inflection point is that spot right before the peak selling point. This is the perfect time to start aggressively pitching your business.

Why not wait until the peak? If you don’t start earlier, the peak may have already passed by the time you actually seal the deal. Beginning right before the apex gives you some wiggle room in case things move slower than you anticipate.

5. Be realistic – I’ll often encounter owners who base their selling price on the amount of money they need for retirement or some other personal requirement. This is a quick way to turn off potential buyers.

“Selling a business isn’t like selling a house,” Terri says. “You sell it for what it’s worth, not what you want.”

6. Talk to your partner(s) – This obviously depends on whether or not you have a partner or several partners. If you do, make sure you’re on the same page regarding when and how you want to sell the business. Understand that this may include some difficult conversations. Be honest and transparent about your views, and be open to theirs. Establish your common goals and work together to execute them.

The Biggest Selling Mistakes to Avoid
You now know what you need to do, but what about things to avoid? With any monumental task, there are likely to be some hurdles along the way. Here are the two biggest mistakes that Terri sees sellers make:

1. Being emotionally unprepared – As a business owner, your company is your baby. You’re kidding yourself if you don’t think you need to prepare emotionally, and sometimes spiritually, to hand over the reigns.

Terri explains it this way: There’s an x and y axis between your emotional needs and your business needs when considering the right time to sell. Your business may be primed in every economic aspect for selling, but if your emotions aren’t in check, the time isn’t right.

What sort of issues could occur? First, there’s wasted time and money.  Seller rarely outright admit that they don’t feel ready. Rather, they’ll drag potential buyers through a lengthy and costly negotiation process, making excuses as to why they don’t agree to potential deals.

“If a buyer and seller are serious and come together, a deal will get done,” Terri says. “If they’re stalling, there’s generally an underlying issue.”

Things get even stickier when a business partner or multiple partners are involved. You can spend time and money at the negotiating table, and then get to the end of the process and realize you’re not on the same page about closing the sale.

What’s even worse is if you sign a legal agreement from which you later decide to walk away. Even if you’re able to somehow back out of a binding contract, doing so will severely hurt your reputation as a trustworthy seller going forward.

2. Over-reliance on family experts –  This mistake especially pertains to longstanding family businesses. These companies often have allegiances to certain experts, be it lawyers or financial advisors, who have advised the company for generations.

However, this doesn’t automatically make them the right people to guide you through the selling process. With so many nuances and intricacies, the selling process is best handled by someone who specializes in the trade.

“The smartest thing a family expert can do in this case is step aside, telling the seller that they’ll provide support, but advising them to seek professional guidance from somebody else,”  Terri says.

Understanding the Legalities of Selling Your Business
Sellers who are new to the process may be thrown off, and even feel blindsided, by certain legal obligations that occur when selling. Understand that these are not meant to take advantage of you, but rather to protect the buyer.

Agreeing to a non-compete – Usually, a buyer doesn’t want the seller hanging around after the deal is complete. They simply want to sign the documents, shake hands, and go their separate ways. This often involves asking the seller to sign a non-compete, which Terri said makes a lot of sense.

“Buyers don’t want to worry that you’re going to stab them in the back once the deal is done,” she explains.

Here’s a story that illustrates this point well: Warren Buffet once purchased a Furniture Mart in Omaha that had been under a family’s ownership for generations. However, seeing the presiding owner, a grandmother in her old age, Buffet didn’t bother asking her to sign a non-compete.

Turns out underestimating grandma was a big mistake. She went right across the street and started another competing business, eventually forcing Buffet to purchase that company from her as well.

Realizing continuing risk – Even after you sell your business, there’s a certain amount of liability that comes back to you. The exact nature of those risks and how long they last depend on the specifics of the agreement.

“Some sellers assume that once they sell their business, they’re just going to walk away with a big pot of money,” Terri says. “They’re surprised to find that the world doesn’t quite work that way.”

The best way to offset this risk is to disclose everything to your buyer. This comes back to hiring an experienced lawyer. They’ll help you turn over every stone to ensure you’re protecting the buyer to the best of your ability, which mitigates the amount of risk you incur.

Reading over this list of requirements and considerations, you may feel a tad overwhelmed. I don’t blame you! Selling a business is a Herculean task. That’s why the success you enjoy down the road depends entirely on how well you plan out of the gates.



Rock LaManna helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. He is President and CEO of the LaManna Alliance, and provides guidance on how to grow a printing business, merge with a partner, make a strategic acquisition or create a succession plan. Rock can be reached by email at [email protected].