Forward Article 
Selling a business: the tough questions
PART THREE OF THREEIn the last two issues of Money Matters we analyzed Carl’s alternatives to selling his business. Let’s assume you’re thinking about selling your business within three to five years. What things should you be doing right now?
Get connected
First, you need to be in a group of your peers. Christ@Work and a number of other ministries and businesses in the United States have weekly and monthly groups for business owners.
Although there are some excellent secular options, I recommend that you join a group of Christian peers who operate their businesses based on biblical principles. Most small business owners do not have a legitimate board of directors or advisors, so finding such a group is a must.
Financial issues
Next, you need to have an excellent accountant and banking relationship. It may pay you to start having audited statements each year.
This is not a bad investment, even if your banker does not require it. It always helps to have outsiders come in and review your process.
While you’re at it, it is time to clean up your expense account and get all the personal expenses off of your company income statement. First of all, this shows integrity to the IRS and others, and secondly, it will reveal your firm’s true profitability.
Make sure that you have a current “Buy/Sell Agreement” with any partners, term life insurance for the unforeseen, and a current will and living trust to ensure proper transfer of your ownership.
Also, make a list of the legitimate advantages that you get in owning a business including retirement contributions, healthcare and insurance, travel and automotive benefits, and authorized entertainment or other perks of ownership. Every executive has internet, cell phone, and other office benefits that could be lost in the sale unless you negotiate for them.
Also look at your balance sheet. Why not be honest with yourself and charge off that receivable that you cannot collect? In fact, do you have some customers who have always been slow paying? Are they worth the hassle?
Look at your inventory. If it is over one year old, you are kidding yourself about its value. Anything over a year old is a museum piece, not inventory. Charge it off now, get the tax benefit, and dispose of it or give it to a charity.
Closely check your equipment list for assets that are still on the books, but you stopped using years ago. Technology usually becomes useless before you can depreciate it. So, clean up your assets, and make a list of good assets (like desks and equipment) that are not on the books but are still functioning and bring value to a sale.
Do you have an allowance for doubtful accounts? Have you got all of your accrued expenses on the year-end accounting? Have you listed your prepaid items, like insurance? If you work over your balance sheet now, then you will properly reflect your earnings the next few years.
People issues
Next, look at your key people. Are they being well paid, with adequate bonuses, and retirement benefits? Do they have a chance to move up with more responsibility?
Is there someone who could take your job? Have you started to groom that person for more responsibility?
Are your key salespeople rewarded with incentives? Do all of them have a non-compete contract? Is it enforceable? Who has the key relationships with your major customer? Do you reward your stable long-term employees?
If you knew that you were selling the business or part of your ownership within five years, what ministry or culture would you want to create while there was still time? What can you do for the spiritual lives of your employees, vendors, and customers?
How can you impact their families? What about a company vision, mission, and values statement? What about having a chaplain service? Do your coworkers know your values, your beliefs, and your concern for them?
Personal issues
Is this firm more than a job or just a financial investment to you? Is it an investment of your life and a ministry?
Can you groom a successor and keep part or all of the ownership of the business? Can you take off more time and grow your management team?
Do you have other business interests, investments, and ministries? What is your passion? If you knew you had only one year to live, what would you do? Why aren’t you doing it now?
Conclusion
If you get all these things done, then you may decide that the business is too valuable of a personal investment to just sell for money. You may want to keep it.
But, if not, then all this work will greatly enhance the financial value of your business, and the process will be invaluable in determining the next stage of your life calling.
Preparing to sell your business is an exercise that all business owners should go through, whether they intend on keeping their businesses or not.
The passion, the people, the purpose of your life greatly overrides the financial balance sheet issues. Every business is a gift and responsibility from God for only a season or for a lifetime. This exercise helps answer the important questions.
Kent Humphries and his wife, Davidene, are the authors of Show and Then Tell: Presenting the Gospel in Daily Encounters, and Lasting Investments: A Pastor’s Guide to Equipping Workplace Leaders to Leave a Spiritual Legacy. You may contact them at Kent@fcci.org or 405-917-1681.
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