Five housekeeping tips to take long before you are ready to sell your business

Begin your business with the end in mind.

Author Stephen R. Covey in his book “The 7 Habits of Highly Effective People” says in habit #2 “Begin with the end in mind”

  1. Key employees, when you hire them or at the earliest opportunity, have them sign a non-solicitation, non-disclosure agreement which would be easier to get than a non-compete agreement.  To try and get these agreements from a key employee just before you are ready to close on the transaction may be tough to accomplish and could be critical to close the sale. This would be an agreement you would want an attorney to prepare for you.
  2. Before signing or renewing your business lease it is worth the money to have an attorney that specializes in commercial real estate review it for you.  Almost all leases will require a personal guarantee.  You want to be sure; the personal guarantee ends at the end of the lease term.  Typically, a personal guarantee does not end with the assignment of the lease but might with a new lease.  You want to be sure your right to assign or sub-let the lease, that approval cannot be unreasonably withheld.
  3. If your lease has options to renew many will have a clause that requires you to give written notice to the Landlord of your intent by a certain date.   For most businesses having a lease on the current location for a reasonable period in the future after the close is a very important part of the transaction.  Be sure NOT to let this date pass if you or the buyer plan on keeping the location.  If you fail to give this notice, you could lose your legal right to exercise the lease option(s), the Landlord can jack up the rent, or ask you to vacate the premises at the end of the current term. 
  4. Don’t let your inventory get out of control.  Inventory is typically INCLUDED in the asking price of the business.  If you have excessive inventory it will be money out of your pocket at the closing table.
  5. Once you have decided to sell contact the Landlord as early in the process as possible.  Many take months to process a request to assign a lease.  Ask what the landlord is looking for with a new tenant so you can consider this information when evaluating potential suitors for your business.  Many have an application for new tenants to complete, request a copy of the form. Get a copy of the SBA Landlord Waiver which is required with SBA loans.  This form grants the SBA ownership of the assets of the business used as collateral for the loan.  If the transaction will be a cash transaction, don’t bother.