Everything is going along as planned and then BAM, you have an offer to buy your business come from out of the blue. It happens in this perceived seller's market. An unsolicited offer can mean a number of things: the buyer admires your success and wants to combine what they’ve built to achieve a synergy for further growth or they’re a competitor who wants to absorb your business. Even if you have a planned sale on the horizon, these tips will serve you well as you navigate the sales process.

So, before you decide to roll out the red carpet or slam the door, here are 10 things you need to do first:

1. Take a Deep Breath

Don’t let anyone create a sense of urgency for you. Take a few months (yes, months) to fully and objectively evaluate any offer from a financial, legal, and especially emotional angle.

2. Have an Honest Talk with Yourself

Would you buy your business? If not, why?  If your answer is a resounding, “Of course I’d buy my business!” and your reasoning is logical rather than emotional, you’re more likely to reject the offer (at least the initial one).

3. Ask Yourself Why an Offer was Made

Why does this person(s) want to buy my book? Never mind what they told you, think about what they’re hoping to achieve by acquiring your business. Is it consistent with your values or are they just trying to absorb clients?

4. Do Your Due Diligence

Always, always, ALWAYS dig deeper into the potential buyer.  Check their compliance record, regulatory standing, and community reputation.  Make sure they can actually afford to buy your business. They’re going to dig into your business so make sure you do the same to know exactly who you’re potentially selling to.

5. Get a Professional Valuation

Don’t rely just on a “rule of thumb”.  This assumes all practices are equal. A professional valuation takes into consideration the nuances of your practice.  It may also identify areas where you can improve the value and therefore maximize the price.

6. Assemble a Team of Professionals

This is when you want to pull in the big guns and talk to other professionals such as your lawyer and accountant. This is your life’s work, make sure to dot all those Is and cross the Ts.

7. Don’t Sign ANYTHING

Don’t sign anything until you absolutely have to!  The documents that you will have to review follow this basic path:

1. Non-Disclosure Agreement (NDA) - everyone must adhere to strict confidentiality.  This is signed early in the process.
2. Letter of Intent (LOI) - This states you are in negotiations and lays out the broad terms of the deal.  It always gives the buyer a period of exclusivity during which you can’t entertain any other offers or disclose that you’re speaking to the buyer.  The LOI isn’t a binding offer and its not uncommon for the price first offered to drop between the LOI to the final, formal offer.
3. Offer to Purchase - this is the of the transaction that includes final price, payment terms, timing, etc.  It is usually not binding until the Sale & Purchase Agreement (SPA) is signed by both parties. However, there shouldn’t be any material changes between this document and the SPA.
4. Sale & Purchase Agreement (SPA) - the final legal document that seals the deal.  It confirms the identities of both parties, the price, and all the terms and conditions.  This is usually the last document signed at closing.

8. Loose Lips Sink Ships

Even though you have an NDA in place, potential buyers will still remember important details you might mention.  At the risk of good memories DO NOT disclose anything such as client names, profitability, etc until absolutely necessary. If the transaction doesn’t proceed, you don’t want sensitive information floating around!  Protect your information and beware of agreement violations.

9. A Need to Know Basis

When do you let employees know? Chances are, some of them will be involved in gathering information.  The risk is that key employees will start looking for another job in fear of losing their current role. Firstly, there is no one “right way” to approach this situation.  Often the best bet is to have an honest and confidential conversation about the potential sale and that you don’t know what will play out. If appropriate, put an employment agreement in place that outlines:

• A severance package if the buyer terminates the employee during a specified time.
• A one-time bonus for their assistance in getting the transaction completed.
• A “loyalty” bonus if they remain with the practice for a specified time.

10. Stay the Course

Continue to manage your business to avoid concerns or suspicion amongst employees and clients but also to avoid deteriorating financial performance that could negatively affect the price and terms of the deal.

One Last Thing

Keep in mind that the buyer will be the custodian of your legacy.  How your clients were treated and what became of those relationships once the new owners take over is what they will remember.  Choose your plan - and that buyer - with care!