11 THINGS You Absolutely Need To Know About Selling Your Business by John F. Dini

Author:John F. Dini [Dini, John F.]
Language: eng
Format: mobi
Published: 2010-08-09T14:00:00+00:00

Projections

Many sellers and business brokers will prepare projections describing the future prospects of the business. While this may help a buyer to conceptualize the possibilities, it can also lead you into trouble after the sale.

Always discuss the ideas that you have for growing the business. After all, if a buyer is paying for your company with the next few years’ profits, he will need to understand how he can earn some for himself, too.

You probably have any number of things that you never had the time to implement, or you just didn’t have the inclination to do. Make a list, with the explanation that not every one may be a great idea, but they can help the buyer to see greater potential.

Buyers will inevitably see the obvious opportunities first, and it’s likely to be something that you’ve already tried. Don’t shoot down the buyer’s ideas. Be honest, but remain open to the possibility that a different owner under different circumstances might have better results.

Avoid the “hockey stick” graph. That is where you project modest increases for a few years, and then because of economies of scale or critical mass the results suddenly skyrocket. In addition, don’t label future projections by year, such as 2013, 2014, 2015 etc. Either approach to projecting could result in a claim of misrepresentation if it doesn’t come true.

If you are going to present projection to a buyer; label them with percentages or growth or profit. Saying “This is what would happen to your economies of scale if revenues increased by 15%,” is a theoretical exercise. Presenting them as potential sales in future years could be taken as a representation if they don’t come true.

Of course, the best projections are those that were documented in the past and came true. Having a written business plan with past iterations on hand is the best of all possible projections.

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