Isn’t entrepreneurship and a small business ownership one in the same? Not necessarily.
I recently met with a woman who is an “entrepreneur” in the true sense of the word – she developed a unique business concept, implemented the plans and created a business. She jumped into the murky waters without a life preserver and took on the risks. After successfully running the business for the past few years, she is considering the sale of her business.
A potential buyer wants to become a “small business owner” and acquire the business. While this business decision does involve some risks, this buyer is not necessarily an entrepreneur in the true sense of the word. He is looking to make a career change from his corporate job to owning and managing his own business.
The challenge is that the “small business owner” buyer wants to minimize his risks before he leaves his salaried position. He needs to see the past few years of financial statements, understand the customer base, review contracts and lease agreements, understand the marketing plans, understand the supplier/vendor relationships, ensure the key employees remain, make sure the website and social media platforms are secure, etc.
The “entrepreneur” seller built everything by blood, sweat, tears and taking on lots of risks. Like many entrepreneurs, she may not have spent much time preparing her business to sell; however, it is imperative for all business owners to be ready to sell. It may take some time and effort, but the increased business value will be well worth the investment.
How to prepare? Collect and maintain financial, employee, commercial, and asset records, including, financial statements for the past three years; Federal Tax Returns for the same periods; current year-to-date financial records; inventory information; asset list of furniture, fixtures and equipment; copies of lease(s) for real estate and equipment; employment contracts, organization chart, employee profiles; customer and/or supplier contracts. And whatever information is pertinent to your business or industry.
The entrepreneur selling his/her business will maximize the value received, while the prospective buyer will have peace of mind as he/she takes on ownership of the business.
A business intermediary (business broker) can provide an invaluable resource to facilitate the business transition process. Check his/her license (if required for your state), review his/her company, interview a few people. If in Florida, make sure he/she is member of the Business Brokers of Florida.
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