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Katlyn:  Hello, I’m Katlyn Graham. I’m here with Jeff Doherty, an attorney at MacLean, Holloway, Doherty, Ardiff, and Morse. Jeff specializes in corporate law. Welcome, Jeff.

Jeff:  Thank you for having me.

Katlyn:  Thanks for joining us. We’re discussing how to sell a business. I know you are very familiar with this process, and handle it for a lot of clients, Jeff. For those who are unfamiliar, or about to undergo this process, what are the steps in preparing, a business for sale?

Jeff:  Sure. This is an area that’s a critical practice area, in our firm. We do a fair amount, both on the buyer and seller side, negotiating business deals, in this regard.

The first question we always ask clients, if you’re coming into our office, and saying, “I want to sell my business.” We’ll say, “What’s it worth to you? Why are you selling it, and what is this worth to you?”

It’s important, that someone offers that perspective, to the client, because they may not have thought about all of the reasons, and the process of selling a business.

We always say, “What’s it worth to you?” People say, “What’s my business worth?” Really, the question is, “What’s it worth to you?” You’re the one who’s selling the business.

If you’re the buyer, “What’s it worth to you?” Because you’re the one buying the business, you’re going to pay the money for it. There’s a number, of different ways where, you can value a business.

Sometimes they’re valued based on revenue, sometimes they’re valued based on earnings, or some combination of that.

Very often, with a business owner the small business, or closely held business, is tied in tight with the person’s life. How is this going to affect them? We always have those discussions, in a very high level preparing your business for sale.

” Are you ready to sell your business?” is the question. We offer our insights in that regard, and try to help them along, on that decision.

Katlyn Graham:  I was just thinking in my head, it may have more than, just monetary value. It sounds like you’re suggesting, for the seller.

Jeff:  It does. It’s not just the purchase price, it’s “What are you going to do? You’ve been running this business, for your entire working life, or an important portion of it, and what are you looking, to get out of it? What are you going to do, as you go forward? Are you going to continue on, with the business, or are you going to simply go off, and retire? Does the valuation, support your retirement strategy?”

Once you’ve talked the client through, those types of issues, the question is, “OK, what do I do now? How do I prepare it”?

One of the areas that’s critical, it’s called due diligence, how have you maintained your corporate records? How have you maintained your contracts? What have you done, to protect your intellectual property? These are all the questions that a buyer, is going to ask for, which you better have answers.

In preparing your business for sale, if you haven’t done, those types of things, like protect your intellectual property, make sure your, employees have workable confidentiality agreements in place. If your non‑solicitation, or non‑compete agreement is appropriate, make sure those are in place.

The idea being that you want to, make sure that once the business issues, are negotiated, price, terms, and so forth, that the process of selling the business, doesn’t get bogged down, in due diligence issues.

Katlyn:  That would be a shame, if it would be pulled down, because of that. Getting all those agreements worked out, I would think that once you’ve done, there would be other steps involved too, making sure the business has a positive…it was making a profit.

I would think, would be important too, I bet you have something to sell.

Jeff:  That is important although being profitable, is not necessarily a predicate, for being a successful candidate to sell your business. You may have a piece of intellectual, property that is very valuable that you, have not been successful in exploiting, for one reason or another.

You didn’t have the right people, didn’t have the right customers, where another strategic buyer can look at that and say, “You know, these guys haven’t been able, to make a go of it, but if I buy this business, I can bolt this piece of intellectual property, onto my business. and I can exploit that in a way that makes, profitability much more likely.”

You see, that frequently in the start‑up stage, with companies, companies that are developing a new technology, they’ve developed it, they spent money to develop it, they are at the commercialization stage, and are wondering how to do that.

We frequently counsel clients, who are in that stage of development, and either put them in contact with folks with, whom we have relationships that can help them or if we can help them directly ourselves and say, “Look, this is an idea. This is how you should be proceeding with this piece of technology.”

Katlyn:  I would think that this, process would differ depending on, how large the company is. If it’s a small yogurt shop or whatever, it might be more streamlined than, if you have a huge corporation.

Jeff:  The issues are the same, regardless of scale. I should say, the process is generally the same, regardless of scale. A larger company, there may be a greater complexities, whether it’s with respect, to the nature of the technology, or the nature of the business that’s being sold.

On the other hand, if you have an unsophisticated, relatively small [inaudible 6:00] held business, it can be as complicated or more so, because you’re dealing with people, who are perhaps inexperienced with, selling their company, or selling a portion o their company.

They don’t appreciate it, they don’t understand, as they’re developing their business, not looking at it with an exit. We always ask clients, when they come into our office with a business idea, we say, “What’s your exit strategy?”,

“When? I’m just starting this business.”

“If you’re just starting his business, you’re starting it for a reason. You think it’s valuable, you think you’re going to, make money at it. How are you going to make money at it? Is this a business you’re going to work in, for the rest of your life or you going to turn it over, to somebody else after, four years or five years or 20 years”?

It may sound counterintuitive, but even at that stage you, should be thinking about, “What am I going to get out, of this business?” In terms of preparing a business for sale, it starts at day one. Anybody who’s advising a client in that regard, should take that approach with them, because it’s a consideration.

Why would you get, into a business that you’re not going, to make any money at?

Katlyn:  So, really thinking about the long term?

Jeff:  Long term and short term. Not surprisingly, with a business owner. Those are all the concerns, I deal with every day. I have today’s problems, to solve, I have tomorrow’s, problems to solve. They’re all my problems to solve.

We counsel clients and people, who come into our office looking, to either start a business or sell a business, “What have you thought about in terms of the end game?”

Katlyn:  Some key questions. When you’re selling a business, do you list it somewhere? Is it word of mouth? Do you put a sign out? What do you recommend?

Jeff:  It’s not like selling your house, that’s for sure. Think about it, if you were to advertise, your business for sale, generally speaking, your competitors are going to see that. They’re going to use it against you. They’re going o say, “Sally’s getting out of this business, so you should come with us.”

Not a good approach. On the contrary, it’s very often the case that, when you enter into negotiations, for the sale of your business, you have very strong, confidentiality agreements in place.

That’s one of the reasons why it’s important to have a lawyer, experienced lawyer, because they’ll know what the confidentiality agreement should say, how to enforce and to make sure that the, other sides standing by the agreement.

To answer your question, you don’t necessarily list it. You may talk o a broker. You may talk to an investment banker, if it’s a larger business.

You may talk to some of your strategic partners, people with whom, you have business relationships that you, trust and say, “I’m thinking of selling my business, what do you think? Where’s the value?”

It’s important to get input from, a lot of sources, but it’s also important, to make sure that your customers, and your employees for example, you don’t want to lose key employees, because you’re selling your business, because the word gets out.

You know how water‑cooler chatter is, some of its fact, some of its fiction, but it can all have a very negative effect, on the performance of the business.

It’s important to keep it close to the vest. It’s important that you get input though, from those whom you have trusting relationships.

Katlyn:  You don’t want to broadcast out, there that you’re looking to sell?

Jeff:  No, you don’t.

Katlyn:  You want to keep it, a little bit more DL.

Jeff:  You want to control the message. There’s a time and a place, for disclosing the sale. That time and place, is typically one of the terms of the sale, of fully negotiated.

There’s an agreement in place, so that neither party can get out of the way, or can renegotiate terms based upon, any negative event that publicity, might have.

Katlyn:  Get it locked in?

Jeff:  Get it locked in.

Katlyn:  This sounds like, the type of thing that you would, need a lawyer to be the middleman, and work out the details.

Jeff:  You should. Both a lawyer and an accountant, because there are very important, not only legal implications, but tax implications. If you structure the transaction incorrectly, you can pay more tax, than you should be required to pay, because you didn’t do it the right way.

It’s important that you have, a firm like our firm where we’ve got, both corporate practitioners. We’ve got tax practitioners. We’ve got litigation attorneys, if a deal goes south.

It’s important to have, strong representation in your corner, because you’re not going to be able, to think of all of these issues yourself, typically.

It’s important to work with experienced lawyers, and accountants to make sure that you, valued it properly, that what you’re getting out of it, is what you expect to get out of it. You know that it’s the most efficient transaction, for you.

Katlyn:  It becomes a successful sale.

Jeff:  It does. The timeline, from start to finish is a lot quicker, than people think, but it’s still not immediate. It could take 60‑90 days, from the beginning to the end, of the transaction.

In that period of time, there is due diligence, there’s negotiating an agreement, there’s negotiating with the customers, and that [inaudible 11:57] due diligence exercise. They may want to see, your intellectual property, if it’s an intellectual property purchase.

All of these issues, we have experience with. We’ve been through it. Typically, most business owners haven’t been. For that reason alone, it’s important to have someone, who knows what they’re doing working with you.

Katlyn:  Like you?

Jeff:  That’s right.

Katlyn:  [laughs] Thank you, Jeff. For more information, you can visit the firm’s website, at mhdpc.com or give them a call at 978‑774‑7123.

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Jeff:  Thank you.

Katlyn:  Thank you.

[closing music] Transcription by CastingWords