Editor’s Note: This is a guest post by John Fincher, a Certified Business Intermediary in Austin, Texas. John is not an attorney, but we asked him to share some thoughts with our readers who may be contemplating selling a business. Click here to learn more about John.

1. Selling a Business is a Complex Process and Can Take 9 Months or Longer

Selling a business is not like selling a house or any other personal property you that you own. I always say, “Selling a business has a lot of moving parts.” Those moving parts require the guidance of someone who is experienced in the process and can effectively move the deal from step-to-step. Planning is step number one and includes understanding the owner’s goals for a transaction, your company value, and signing an engagement agreement with a Sell-Side M&A Advisor. Step number two is providing the information requested from your Sell-Side M&A Advisor to prepare a Confidential Business Memorandum (CBM) with many details about your company, the market, your competition and the financials recast to show the true earnings of the business. A marketing plan is activated and buyers are contacted and required to sign a Non-Disclosure Agreement (NDA) before being presented with the CBM. On the third step, once interested buyers are located, there is a flow of additional information requested and questions answered. There are site visits after hours or on weekends to protect confidentiality that the business is for sale. A Letter of Intent (LOI) is negotiated with a buyer in this deal making stage. Finally, there is a move toward a Close that includes coordinating all of the due diligence requested from the buyer that includes your Sell-Side M&A Advisor setting up a secure data room that the buyer can access. Your Sell-Side M&A Advisor will work closely with your transactional attorney to resolve any open issues as your attorney negotiates and finalizes a Definitive Purchase Agreement. These four steps that I’ve briefly outlined require approximately nine months of time, which is the average, although deals have concluded in shorter time-frames and longer.

2. Know the Right Time to Sell

When is the right time to sell your business? It would be logical to say that the right time to sell is when your business is worth the most money or selling it will achieve your financial goals. The short answer is to sell when your business has at least three years of upward trend in revenue and profitability and certainly before the next downturn, unless your business is recession proof. However, some sellers have to sell rather than want to sell. I call these the five bad D’s – Death, Divorce, Disease, Downturn and Disgruntlement and they don’t have a choice as to the timing.

3. Use Your Legal and Accounting Professionals to Clean Up the Business Prior to the Sale

Cross your t’s and dot your i’s with expert legal advice to make sure your business is saleable from a legal perspective and with your CPA to make sure your business is saleable from an accounting perspective.

Are your contracts assignable? Is your lease? Have you kept the proper annual shareholder meeting minutes if required by your legal entity? Do you have any pending lawsuits or legal matters that need settling? Do you have any regulatory or environmental issues? Do you have any tax liabilities that may need the help of your CPA professional to solve? Are your books and records accurate and will they hold up during due diligence? What is a likely tax scenario of how much you will owe upon the sale of your business and is there a compelling legal reason or tax reason to sell stock instead of assets?

4. Be Mentally Prepared

Are you willing to think win-win with a buyer? There are several ways to structure a sale and some will benefit the Buyer but not the Seller and others will do just the opposite. There will be much to negotiate throughout selling a business and oftentimes you will need to move toward the middle as will the Buyer. Contain your ego and emotion and use your Sell-Side M&A Advisor as an emotional buffer when necessary between you and the Buyer. Keep in mind that you will need a good relationship with the Buyer after the sale as there is much to transition from one owner to the next after the Close.

5. Know Your Path after the Sale

Know what you are going to do, after selling your business. Some people want to stay engaged with the business in some capacity and others are ready to walk away. Do you have other interests and passions to pursue that will give you purpose?

John Fincher is a Certified Business Intermediary with Corporate Investment in Austin, Texas. He is a former entrepreneur who has bought, sold and merged companies and has been working for over twelve years representing sellers in M&A transactions.