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How to Sell Your Business
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Article 1: Can Your Business Be Sold?
You’ve built a successful business that serves clients with quality products and service. Now it’s time to cash out. Is your business saleable?
Very often the answer is yes. “Ultimately most businesses are saleable to the right person or company,” advises Dr. William Rupp, dean of the college of business at the University of Montevallo in Montevallo, Ala.
Problems can arise, though, when proprietary skills cannot be transferred to new owners. Such skills often characterize “people businesses.”
An example is a law firm. Suppose five of a small firm’s best attorneys decide to resign following the sale of their organization. Such a loss of talent would devastate the firm. Prospective buyers realize this, with the result that the value of the firm drops in their eyes.
“It’s much harder to sell a business that is dependent on human creative skills,” concludes Rick Rickertsen, managing partner of Pine Creek Partners, a private equity firm based in Washington D.C.
Despite this difficulty, many service businesses can be sold.
“Advertising agencies are sold all the time,” points out Rickertsen. “Even consulting businesses are sold.”
How? These organizations often secure their best people with attractive employment contracts. These written agreements help retain the talented people who are of most value to prospective buyers.
Service businesses can also be sold when their procedures have been distilled into reproducible systems which can be taught to new people. For example, an accounting firm may have developed a system for efficient processing of tax returns. This template becomes a transferable – and valuable – asset when the firm is sold.
Unfortunately, in some cases a business cannot be sold.
“A business in which the service is completely personalized will often not find a buyer,” cautions Mark DiQuattro, a business valuation analyst in Belleville, N.J. “This would be the case, for example, with a highly skilled surgeon’s practice.”
Another example would be a freelance writing business. Here, the skills required to produce writing materials reside inside the current owner and have not been distilled into an operating template which can be transferred to someone else.
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