Selling Your Business Is Not Exactly Like Selling Your Home

By Randy Cochran, Senior Managing Director, The Transition Companies and Robert Feiger, Esq., Partner, Friedman & Feiger, LLP

Getting your business ready to sell is both like and unlike selling your home.

When you sell your home, you make it look presentable for sale by performing touch-up painting, maybe replacing a worn carpet, or replacing windows that may have lost their seal. These are all considered to be "cosmetic" improvements.

But unlike selling your home, there are many ways to increase the enterprise value of your business and your return on investment that extend beyond the cosmetic variety. And, many of these take time to design and implement, so starting on them now, or as early as possible, will provide you the best opportunity to maximize the value of your company.

1. Get your financial records in order:

a. Why? Buyers will perform due diligence on your financial records to determine how much assurance they can place on them. When buyers find "issues" in the financials, they typically ascribe the types and volumes of issues to risk. The higher the risk (that is, the more investment on the buyer's part to try to mitigate the risks), the lower the selling price. To the extent there are questions and/or concerns, buyers will use these "red flags" to negotiate a lower sale price.

b. What to do: Have a review conducted to simulate the due diligence process, identifying all of the red flags that will arise during due diligence. Red flags are essentially discrepancies or "vague" areas of your financials where sub-ledgers do not readily and apparently tie to the general ledger or where there are large balances that do not reconcile to a detailed schedule. Have someone perform a "GAAP Review" to identify all of the issues that will potentially come up at the closing table and possibly be used to reduce the sale price or delay your payment. Then, correct or mitigate the issue immediately, even if you are not closing for several months.

c. The benefit to you: Maintain and/or increase the sales price. Having clean financials gives buyers confidence in the numbers, which can lead to a higher sales price.

2. Prepare for due diligence:

a. Why? Buyers use time (elapsed time) in the deal process as a negotiating tactic. The more prepared you are for due diligence, the less time it will take to close. The less responsive you are to their requests for information, the more time it takes to close, the higher the probability your original price gets "discounted" by the buyer.

b. What to do: Have someone who is very familiar with the due diligence process collect and organize the data you will need to present to a buyer. Today, many use online data rooms for this, so that access is easy and immediate while controlled for confidentiality. Also, you can control when certain documents are released based on how far along you are in the process. For example, you can place a top ten customer list in the data room, but not release it until terms and conditions are finalized. [A "Due Diligence" Checklist has been prepared by the co-author of this article which provides a comprehensive breakdown of those document categories a prospective buyer will require as part of its analysis of your business. To request this "Due Diligence" Checklist contact Robert Feiger at]

c. The benefit to you: Closing on time and getting paid on time.

3. Have a plan for growth, and execute on the plan:

a. Why? Because buyers are not purchasing your company to operate "as is". They want to increase the return on investment, and will look for companies that have demonstrated a reasonable rate of growth.

b. What to do: You need a documented plan and you need to manage to that plan. Executing against a plan demonstrates your and your employee's ability to plan strategically and execute on a day to day basis. The budget and forecast will become a significant part of this plan.

c. The benefit to you: Buyers will give more credence to projections (and thus a higher sales price) if you have demonstrated the ability to plan and execute effectively.

4. Prepare a budget and forecast, then live it:

a. Why? Because having targets in writing are motivational to most people, and you need everyone on your team pulling in the same direction. Buyers are looking to see how well managed the company is, and whether its management team can work together to bring the benefits of strategy to the bottom line. To the extent that the forecast is documented and you can show that you met or exceeded forecast, the buyer will ascribe less risk to continuity and possibly offer a higher price. Having a budget will also help move your company to its highest performing potential, which will have a direct effect on the bottom line and the selling price.

b. What to do: Prepare a detailed forecast (including detail at the revenue driver level) and monthly budgets and manage to the numbers every month.

c. The benefit to you: Better internal accountability and a higher selling price.

5. Maximize revenue and profit to the business:

a. Why? The higher your earnings, generally, the more you will make on the sale of your business

b. What to do: You may not be in a position to be expected to know what is best to be done in all aspects of the business to maximize your profit and EBITDA in advance of a sale. Your sell side intermediary or other trusted financial advisor can be instrumental in helping you plan and execute a list of "projects" to ensure you hit forecast targets/budgets and maximize your return during the go-to-market period. These projects can include, among other things, streamlining your operations to reduce unnecessary staff, eliminating unnecessary and non-business operational costs, or expanding markets/industries to include secondary and tertiary uses for your products.

c. The benefit to you: Every dollar you add to the bottom line can have a "multiple" effect on value, meaning a higher sales price. Yes, buyers use multiples in their conversations about deals, but multiples are not their primary method of pricing.

6. Develop a second level of capable management:

a. Why? Buyers know that you will be leaving the company at some point in time. They are concerned about sustainability and continuity of the business at previous levels and higher. To the extent you have a competent management team that can carry on in your absence, buyers will deem the purchase less risky (meaning less investment on their part), and, therefore, pay more for your business.

b. What to do: Document the value-added that you personally provide the business. It may be sales, customer service, bookkeeping, or product innovation. Determine what skill is necessary to replace your contribution, and then find/hire that skill if it does not exist in the company. This point takes time; start now on fully developing your second level of management.

c. The benefit to you: Less risk ascribed to the sustainability of the company, which translates into a higher price or better terms and conditions.

7. Document what people do:

a. Why? Titles don't always convey the reality of a position in a company. Buyers want to know who does what, and in what combination, so that they can make assumptions about staffing levels in their calculations. Quite often, in small companies, one person may hold the job of 2 or more people. This needs to be clearly communicated to buyers.

b. What to do: Document job descriptions for each of the top 2 or 3 layers of management and the supervisory level. Include key skills and attributes, certifications, degree or license requirements, etc. Also, consider developing and implementing employment agreements that transfer to the new owners in order to keep key players on board well beyond the sale.

c. The benefit to you: Buyers will make assumptions about replacing or adding to staff once the sale is closed. To the extent that positions and skills are documented and key players have employment agreements in place, the buyer will lower their "acquisition cost" assumptions, meaning a higher sale price to you.

8. Diversify your customer and supplier base:

a. Why? Concentration in either customers or key suppliers is a big red flag to potential buyers, especially when that concentration is based on a relationship between the customer/supplier and the current owner, who will eventually leave.

b. What to do: Identify concentration issues and either get long-term contracts in place, or work to find additional customers/suppliers to reduce concentration. This is easier said than done and takes time, and is generally easier to do with suppliers than customers.

c. The benefit to you: Less risk in the business, translating into maintaining or increasing your final sales price. Some buyers will not even look at companies with significant customer concentration issues.

9. Keep your customers happy:

a. Why? Buyers will investigate whether customers are happy with the products and services they receive from the target company. This gives them an idea of how loyal the customers will be during an ownership transition. Unhappy customers translate into risk, which leads to a lower selling price.

b. What to do: If you haven't surveyed your customers recently, do so. The key question to ask is "On a scale of 1 to 10, how likely are you to refer our company to a friend or colleague?" The answers to this one question will tell you most everything you need to know about overall customer satisfaction.

c. The benefit to you: Buyers will see a very loyal customer base that is founded upon confidence and reliability in your products and services rather than any one individual, ultimately leading to a higher sales price.


Starting early, and getting the advice of an experienced intermediary, an accountant, and a competent business transaction attorney will provide valuable insight. Your return on investment in these professionals will be realized at the closing table.


Robert E. Feiger, J.D., L.L.M., is a Partner with Friedman & Feiger, LLP, Counselors and Attorneys At Law. For more information on this topic, please contact Robert at 972-450-7350 or email:


5301 Spring Valley Rd.

Suite 200

Dallas, Texas 75254


Robert Feiger




Robert E. Feiger practices in the areas of taxation, estate planning, and commercial transactions. He received a B.S.B.A. with final honors from Washington University in St. Louis, Missouri in 1971, where  he graduated Beta Gamma Sigma; and his J.D., and L.L.M. in Taxation from Southern Methodist University School of Law in 1974 and 1995, respectively.

While at Southern Methodist University, Mr. Feiger was on the staff of the Southwestern Law Journal. He served as Staff Attorney for the United States Securities and Exchange Commission in the Division of Enforcement, in Washington D.C., 1974 through 1977, and as an Assistant General Counsel for Betz Laboratories, Inc., a publicly held company, in Philadelphia, Pennsylvania, 1977 through 1978. He currently serves as a member to the Advisory Council of The Dallas Foundation. He is admitted to the State Bar of Texas, and is also a member of the Tax Section of the State Bar of Texas. 




Business Law;
Tax: Business Entities; Trusts & Estates: Estate & Asset Preservation Planning; Trust & Estates: Probate & Estate Administration