Eight Key Steps to Selling Your Business

• Medical insurance for you and your family
• Travel and entertainment
• Conventions and trade shows
• Expensive cars owned or leased by the business
• Club memberships
• Subscriptions to magazines, newspapers, and electronic services
• Continuing education expenses
• Salaries and bonuses paid to family members who work in the business

For instance, let's say you enjoy travel so you've been attending trade shows at attractive locations. You've deducted the cost as legitimate business expenses—lowering your tax bill, but also lowering the bottom line.

A buyer needs to understand that the travel is discretionary. If it's eliminated, the business will show more profit for its new owner. In recasting your tax numbers, you're not deceiving either the IRS or prospective buyers. You're simply pointing out that the buyer may prefer not to spend money on some of these items in the future, even though you've taken perfectly proper tax deductions for them.

4. Seek Potential Buyers
If your business is well known, word that it's for sale may be enough to bring prospective buyers to your doorstep. Or, possibly someone close to you—an employee, a relative, a friend, a supplier, or a customer—could be an interested and logical prospect.

But finding buyers may not be easy. More likely, you'll need to reach out to a bigger pool of potential buyers. This often includes putting ads in newspapers, in trade publications and on business-sale Web sites.

You may want to engage a business broker to reach more buyers—though you'll pay a substantial commission for the broker's services. Sometimes, too, you need to keep a low profile in your marketing efforts to avoid alarming customers and suppliers. An intermediary such as a broker can help keep information from leaking out prematurely.

5. Negotiate Your Deal
Once you attract an interested buyer, you need to work out the terms of the sale. Here are some key issues:

• Will you sell your business entity or just its assets?
• Will you keep some of the assets (a car or truck, perhaps) that are currently being used in the business?
• Will the buyer pay you in one lump sum or make installment payments?
• In an installment sale, how large will the down payment be and how long will the buyer be given to pay off the balance?
• After the closing, will you work for the buyer, either as an employee or an independent contractor?
• Will the buyer require you to sign a non-compete agreement that limits your right to work in your current industry?

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