How to Sell Your Business, page 22

Accountants and Lawyers, continued

It’s most likely that, in fact, even if you are QuickBooks jockey you already have a relationship with an accountant. As this article suggested in Dressing a Business for Sale, your financial statements are crucial, and should be audited if it all possible.

You should have a lawyer experienced in business deal making. This is not necessarily the general practitioner down the street. If you don’t already have one, try to get referrals. Otherwise, large commercial law firms in your area will be experienced in dealing with mergers and acquisitions and the sale of businesses.

You should sit down with your lawyer and give him or her a full and honest briefing regarding your situation. (Lawyers involved with an appropriate practice may even point a buyer in your direction.)

Your attorney should review all final versions of contracts before you sign them. You must do what you are comfortable with, but I’d encourage you not to involve your attorney otherwise too early in the sales process. As an experienced businessperson, you’ve negotiated many deals. You are capable of handling preliminary sale negotiations without interjecting another intermediary into the process. Also, to the extent you’ve invested in legal fees regarding a particular buyer, you are more committed to that buyer and less likely to walk away—a weaker negotiating posture. Please note that this is controversial advice. Some experts think you should have a lawyer “babysitting” every step of the way.

By all means negotiate a fee agreement in advance with the lawyer who will be handling your acquisition. That way you will not be hit with sticker shock at the end, and you will better be able to utilize legal resources knowing their cost. If you can get a deal where some of the fees are contingent on your sale closing, then you have managed to truly align your lawyer’s interests with your own.

High Sales Price Versus Terms

The higher the price, usually the greater the concessions that must be given. Typically, these include seller financing, earn outs—where some of the sales price depends on the business hitting targets—and holdbacks—money held back in escrow until certain conditions are cleared.

Try to see the deal as a whole. Earn outs do you no good if the targets are not met—and you may have no control over this. Money escrowed is a clear invitation for lawsuits on one pretext or another. Are you ever likely to see it?

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