Go for the Gold

Keeping Focused

Meanwhile, Back at the Office...

So far, so good: You've built a scalable company with a strong growth strategy, you have immaculate accounting and audited financials, and you've started negotiations with two big public companies. The payoff seems to be just down the road.

Hang on. While you've been focused on selling the company, who's been making sure the company stays focused on selling your product? "The last thing you want is a financial or operational hiccup during negotiations," says Freedman. Many deals have been quashed when financial results from the last month or the last quarter are off target. Even if the buyer doesn't walk away, the price is likely to take a last-minute tumble.

Freedman points out that, in a sale, the company is the product. "If you take your eye off the ball and focus only on selling the business, in the end, you won't have a great product to sell."

Diligence and Disclosure

The sale of a business is inevitably as complex as the business itself. If the business has 10 years of operating history, then it has 10 years of potential liabilities, lawsuits and bad accounting. Even for a relatively simple business, buyers want to know exactly where the business stands. That means the seller has to disclose copious amounts of documentation and give a strict personal guarantee, called a warrant or representation, that all disclosures are complete and accurate. "If there's any hair on the deal-any red flags-it's going to come out. So you're best disclosing everything upfront," says Agrawal of VisionQuest. "Don't play any games." The quickest way to unravel a deal is to leave a buyer feeling duped.

The amount of disclosure that buyers require can be mind-boggling. Putting it all together in a reasonable fashion is just one reason to consider hiring outside help. An intermediary, such as a business broker or an investment banker, can relieve you of some of the work while also keeping the buyer engaged. "We always recommend that a third-party intermediary represent you," says Minor. "Even if a large competitor makes a direct offer, I'd still bring in an intermediary who can drive the valuation up."

The seller's dream team of advisors should probably include an investment banker, a CPA and a battle-hardened transaction attorney. A good transaction lawyer will help you get the deal done, while more conservative corporate attorneys may get bogged down in the negotiations and end up killing the deal.

Selling a business is not something you do every day, and it may well be the most important transaction of your life. It's vitally important to use professionals who will push to get the deal done while looking out for your best interests.

The Final Stretch

Remember, no deal is a sure thing until it's done. Perhaps the only sure thing is that selling a business is never simple. Selling out can be the most harrowing-and most rewarding-experience in the life of an entrepreneur. Take it slowly. With careful planning, strategy and guidance, each step of the process can add value to the company and get you closer to crossing the finish line.

Greener Pastures Ahead
Selling a business can take you down the path to wealth...or the road to disaster. What better way to prepare your business than by following in the footsteps of someone who has done it before?

Joe John Duran, a chartered financial analyst, is a worthy guide. In his new book, Start It, Sell It & Make a Mint: 20 Wealth-Creating Secrets for Business Owners (Wiley), Duran draws a clear road map to wealth for any business owner. Duran was a partner in Centurion Capital, an investment management firm that he and his partners sold to General Electric in 2001.

In the opening chapters, Duran describes himself as a "quite average" kid growing up in war-torn Zimbabwe. In fact, Duran and his book are anything but average. The book is a compelling story of personal adventure, beautifully intertwined with concise advice on building and selling a business. As the book maps out Centurion Capital's many stages of growth, Duran guides readers through the key factors and decisions that shaped the company. His insights are applicable to new and growing companies in every industry.

Start It, Sell It & Make a Mint gives entrepreneurs Duran's 20 secrets to business success, with vivid examples from his own experience. Secret number 21: Buy it, read it, and make a mint!

is an investment banker and author of the e-book Finding Funding.

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This article was originally published in the October 2004 print edition of Entrepreneur with the headline: Go for the Gold.

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