Bob and Tracy sold their companies to publicly-traded compaines and they both got big piles of money.

Topic for Discussion: What was different about the two sales and what was similar?

Answer: The sales started off differently but ended up being handled in a similar fashion. Bob started chasing a buyer and Tracy was chased. While you might think that Tracy could negotiate from a strong position since her buyer sought her out, Bob was able to get the interest of several buyers which made his position even stronger.

What they both did was seek out experts to help them. We learned from them that when you are ready to sell, you'll need a business broker, an attorney for the legal documents, a CPA, and potentially, a banker.

All of these experts are important, but probably business brokers (up to $50M sale), the Mergers & Acquistions people ($10M to $300M sale), and investment bankers ($50M to over a billion) -- all "matchmakers" -- are the most critical. Tracy and Bob used different criteria in making their decisions and each made the right choice for her and his company. Tracy was approached by a buyer directly and contracted with a broker with industry expertise. Bob had made the decision to sell and sought the "right" broker based on skill set, enthusiasm, and dedication; he was less concerned with industry expertise. You meet his mergers and acquisition person, Larry Starks, in this episode.

The first job of a business broker is to place a value on the business. However, it doesn't hurt to educate yourself. We all need to be aware of a program by the American Institute of Certified Public Accountants (AICPA); they offer an accreditation program to CPAs in business valuation. Once completed, the CPA is designated as an ABV, Accredited Business Valuation professional. If your CPA is not accredited in this area, you should have a candid discussion with him or her about the need to seek additional assistance. The CPA, as a valuation expert, is particularly critical in circumstances where the broker is compensated with a percentage of the purchase price.

When the buyer or his/her representatives comes in to evaluate your company, that process is called "due diligence". You want to pass due diligence with flying colors. The single most important thing you can do to ensure this is to keep great books. What do we mean by great books? We mean annual financial statements and the underlying records that support those financial statements. It is only with the bottom line results of your company that the buyer can calculate EBITDA -- earnings before interest, taxes, depreciation and amortization, and his or her return on the purchase price. Nothing makes your numbers more credible than if they are certified and attested to by your CPA. And most buyers want a five year track record of audited financial statements.

You think about it: Can you provide a three to five year track record of financials?