Selling Your Business Starts on the Day You Open

lmost five years ago I sold my business, a fine craft gallery with two retail locations in Austin, Texas. The selling process took a mere two months, but the process of building my marketable business took decades.

I began my venture at the age of 44 when I decided to leave a tenured teaching position to pursue my dream of owning a gallery. My qualifications: a master’s degree in fine arts and 24 years as a college art professor. In other words, I knew nothing about the business.

ON BECOMING PROFITABLE

In 1976, I headed to Austin, where I naively opened a pottery shop in a quaint neighborhood near the downtown area. I learned the business by trial and error. My first year brought in a profit of $1,200. The next year our profits doubled. Over time, the small shop grew into an established gallery. We diversified our offerings, brought in new artists and advertised. Little did we know then that by becoming profitable, we’d accomplished the first step toward selling our business.

LOOKING GOOD ON PAPER

After 10 years, I was a businessman — complete with accountants, bankers and financial advisors. We changed locations and took out loans. We made some fumbles along the way, recovered and moved on.

Another 10 years passed and our sales hit a record high. In 1999, as my wife and I approached retirement age, we decided that this was a good time to sell. It was a bittersweet realization, but the timing was right. Luckily, many of the steps we took to make the business viable also made it marketable.

SELLING THE NUMBERS

While it’s rude for an acquaintance to ask how much money you make, every prospective buyer will ask. Be prepared to provide a direct and detailed answer. And if the books don’t look good, you may have a difficult road ahead. How much you get for your business depends on how well you can demonstrate your success.

As business owners, you need to document every area of your business: not just sales and tax statements, but also inventory records, transportation expenses, equipment, rent and real estate assets (if you own your building). Be prepared to present your checkbooks, receipts and credit card statements.

You should have documentation for several years. When a buyer asks to review your finances, every expense must be explained in terms of its contribution to future profits. Hard numbers speak volumes when you want to sell, and a competent accountant will be indispensable.

Think ahead about what you can do to highlight your gallery’s success. You might get your business featured in a local paper or national trade magazine. You can publicize special honors or participate in joint ventures with area non-profits.
Staying actively involved with your local chamber of commerce, trade associations and area arts councils will go a long way to add luster to a business worth buying. Remember, you’re not just selling your business, but also your reputation and good name.

SELLING THE LOOK

What does your business look like? Is it attractive? Do your business cards, logo and storefront contribute to a unified image? Is that look current, appealing and representative of your business? Does it have a good location near other successful businesses?

Though a polished image is essential, there are other things to consider, such as leasehold improvements and future provisions for the assumption and continuation of your lease. These tangible benefits, along with a strong visual presence, provide a powerful incentive for prospective buyers.

TAKING ACTION

Don’t sell your business without consulting an experienced lawyer and someone who has credentials selling businesses and real estate. You’ll need legal advice about confidentiality, non-compete agreements and other pitfalls. Your lawyer will also help you with counter proposals and negotiations.
Before you talk to prospective buyers, you must know if they’re qualified. A broker can help, but it’s entirely possible that you already have interested buyers in mind and won’t need a broker.

When we were ready to sell, we chose to work with a broker. It was an added expense, about 10 percent of the sale, but well worth the peace of mind. A good broker reaches a large pool of buyers and handles many difficult details. In our case, we didn’t want the community to know that our business was for sale. We felt that such news could negatively affect our business and employee morale. A broker ensures that the sale is handled with the utmost professionalism and discretion, so you can continue to operate your business as usual.

Be aware that many buyers seek owner financing or time payments. Enter into such agreements with caution as sellers often find themselves having to take back their former businesses when the new owners cannot make their payments. A cash sale is always preferred.

LETTING GO

Selling your business represents a major life change. For some it’s a relief, for others it’s an emotional upheaval. Keep in mind that while you entered the business to fulfill a passion, selling your life’s work is a business decision. Be happy that your hard work has been validated and your business lives on. Whether you own it or not, that business will always be your baby. Like a child moving onto adulthood, there is no guessing how far it will go. Now is the time to enjoy your new freedom — to rest, reflect and start anew. And remember, you’re not only older and wiser, but also far richer than when you began.

Arnie Popinsky is the founder of The Clarksville Pottery & Gallery. He and his wife, Syd, currently reside in
Austin, Texas, where he continues to work in his studio and remains actively involved in the local arts community.