Advance planning is crucial when you decide to sell your privately held business.  You need to be at the center of that sale planning with the assistance and guidance of your lawyer, your accountant, and your business broker or investment banker.  Please follow these simple preliminary planning steps to assure that you will be selling your business at a high price in the shortest possible time while paying the minimum transaction costs.

1. Talk to your lawyer to make sure that he or she has significant experience in buying and selling a business.  If your lawyer does not have that experience, you should retain another lawyer from the same firm or a different firm who has that experience.

2. Talk to your accountant to make sure that he or she has business sale experience in this area as well.  If your accountant does not have that experience, he or she or your lawyer could recommend one who does.

3. Meet with your experienced accountant and/or your investment banker at least 2 years before you sell your business to review your balance sheet and income statements.  Together you can develop and implement a plan intended to improve your financial statements over the next two year period (reducing expenses, accelerating revenues, adding growth oriented or innovative new product or service business lines making small changes in your operations, etc.).  This plan will help to maximize the expected sale price of your business.

4. Ask your accountant and your lawyer if there is anything you should do to prepare for the due diligence investigation that a buyer will be performing.  Are your key contracts in good shape?  Are your financial statements or your books and records in good shape?  Are your minute books and legal documents up to date?  Work with your lawyer and your accountant to complete these preliminary due diligence matters.

5. Enter into detailed discussions with your lawyer, your accountant and your business broker or investment banker to determine which of your advisors has strengths in which particular areas.  Then work with them to allocate primary areas of responsibility among the following tasks:

a.  Will there be a “data room” where all documents will reside for the buyer’s due diligence?  The data room will consist of financial statements, corporate governance documents, contracts and other legal due diligence documents and other business documents.  If so, who will run the data room?  The advisor running the data room should normally be the person who is primarily responsible for gathering the documents for due diligence, but talk to your advisors beforehand about who will be handling what aspects of due diligence.  Remember that your company employees can share responsibility for due diligence–as long as they can do so while keeping the deal confidential and without unduly interfering with their normal jobs.  Responding to the buyer’s due diligence requests and gathering requested information and documents is a time consuming task.  It is important that you plan properly.

b.  Discuss possible tax issues with your advisors (legal and accounting) and determine who will take the lead on doing any tax research and giving tax advice on the transaction.  You do not want to have your lawyer and your accountant doing the same tax work.  You need to ask direct questions and receive honest answers from the both to determine who has the most depth in the areas of tax which will be most prominent in the transaction.  It does not hurt to have one of your advisors review the work of the other, but you do not need both working on the same tax or other issues.

c.  Determine who will have what roles in negotiating the deal points and in finalizing the documents.  If a business broker or investment banker is involved, he or she will be the one working with you to negotiate the main financial and business deal points.  The lawyer, on the other hand, normally sees his or her role as preparing, reviewing and negotiating the deal documents, including to protect you from known or unknown liabilities or risks while getting you the best deal.  Both viewpoints are important in moving the deal forward.  You want to make sure that their jobs do not unduly overlap and that they are working with each other and not against each other.  Let them know that you expect total cooperation from both.

6. Make sure your own internal team is in place.  Determine early on who you need to rely on internally and make sure every member of your internal team knows his or her job and agrees to keep all aspects of the sale completely confidential until you direct them to do otherwise.  Determine which members of your team are going to work with which advisors and clearly delineate and establish the lines of communication.

7. Finally, although you will probably not be able to negotiate fixed fees for your advisors, have them give you reasonable ballpark estimates of the time it will take to do the deal and the cost of doing the deal.  You need to have realistic expectations before getting started.

If you follow these simple guidelines, you will help to maximize the value of your business, reduce the time that it takes to complete your sale and minimize the costs related to your sale.