The Key Questions to Ask Yourself Before Selling Your ARM Business

Mike Ginsberg

Should you sell your business now, in the future, not at all? Here are the key questions to help you make an informed decision when it comes to the sale of your ARM business.

Is my business ready for a sale?

All businesses are saleable at any time regardless of performance. Let me repeat that statement to emphasize the point. All businesses are saleable at any time regardless of performance. Whether your business is ready for a sale or not is not dependent upon its financial performance unless you have a particular price in mind.

What information will I need to produce to sell my business?

At a minimum, you will need to produce three years of historical financial statements. It is in the seller’s best interest to prepare an adjusted income statement to illustrate the business’s true level of profitability on a recast basis. Tax returns are fine for smaller businesses but I still recommend you take the time to paint an accurate picture of your business’s profitability. The current year’s budget would be helpful but not mandatory. In addition to financial statements, make sure you have a current organizational chart, facilities lease details, client contracts and details about any existing lawsuits ready.

How will a buyer value my business?

The answer to this question does not have to be a surprise. You could have a strong sense of value and potential transaction structure well in advance of a sale as specific attributes of your particular business might add to, or detract from, value.

What advisors should assist you in the transaction?

It is absolutely critical to make sure you have a qualified transaction attorney in place. Your current corporate attorney most likely does not qualify. I don’t typically see any changes in accounting firms needed to assist in a sale, provided your existing firm has a good handle on your company’s financial performance. An experienced and well-connected business broker will help you sift through buyer candidates and properly prepare you for the sale process. A valuation expert can help you determine value in advance of a sale process. A financial planner can also add value to your transaction team.

Is the timing right for me to sell my business?

Sale decisions are made on 3 different levels: macroeconomic, company and personal. A qualified consultant can help you address the first two levels to determine if the timing is right for you to sell your particular business. The personal decision is entirely up to you, your family and your health.

Can I cope with the changes on the horizon?

The collection industry is evolving right before our eyes, with intense regulatory changes that are directly impacting client decisions to sell debt or place accounts with collection agencies or collection attorneys. The cost of compliance continues to escalate as does the cost of technology improvement to keep up with client demand while operating profitability. If the heat is getting unbearable then it might be time to get out of the kitchen.

Can my business thrive (or even survive) the loss of me as the owner?

Are you the type of owner that turns on the lights each morning and is involved in every decision that is made within your business? If the truthful answer is yes, then you should expect that a buyer will structure the transaction around your retention for some period of time post sale. Having key managers in decision making roles prior to a sale will allow the buyer to justify better terms for the seller.

What are the potential deal-breakers if I were to sell my business today?

Picture the playground bully taking the 90 pound weakling upside-down by the ankles and shaking him violently until everything falls out of his pockets. An experienced buyer will sift through absolutely every aspect of your business to make an informed decision about pricing, structure, payment timing and contingencies. This scrutiny will be compounded if outside funding sources are needed to finance your transaction. I recommend that you ask yourself what potential deal breakers would exist if you were to buy your own business. Now be prepared for the buyer to ask the exact same questions.

What will my life look like after a sale?

Assuming you don’t have to work full-time, or anytime post-closing, how will you spend your time? A lot of owners say they will improve their golf game or travel the world. Perhaps that works for some owners but not most. I recommend you spend time with your wife/husband/family and decide together what your life will look like post sale. As much as the sale of a business is a financial decision, that is truly the easier part. The more challenging component of any transaction for an owner/operator (not an investor-type owner) is what their life will look like after the deal closes.