"9-Keys" is an insightful series of "How To's" that addresses vital issues that any business owner can benefit from. They are:

• Seek the best people
• Train your staff to be more effective
• Improve your workers' effectiveness
• Effectively manage your time
• Assess the true value of a business
• Selling your business
• Buying a business
• Avoid bankruptcy
• Determine your break-even point, your point of diminishing return and manage for profit

The impulse to just sell out and walk away from all the problems is felt by every business owner when pressures get too great and recognized rewards seem too few. Sometimes the impulse grows strong enough for the prospect to be given some serious thought.

Because it generally requires an optimistic bias to become a business owner, most owners are unrealistic about what they can sell their companies for, and thus become frustrated and resentful when they discover the reality of their business' worth. Owners can avoid disappointments and frustration if a few simple guidelines are understood so that when contemplating the sale of the company, they have a realistic understanding of what the business is really worth to someone else.

Sophisticated buyers on their own or with professional advice will use the business' profit potential as the true guide for establishing the purchase price. That is why it is important for the seller to be able to justify a real profit potential to the buyer.

Even if the buyer has agreed to the seller's price, but the seller is not going to receive the total purchase price at closing, or if compelled to remain liable for the commercial lease, there is considerable risk that the buyer may not be able to make good on the promissory note payments.

Sellers must carefully screen potential buyers to determine whether they have the dedication, skill, experience and financial wherewithal to survive and prosper in the business being acquired.

The buyer may not reveal the full extent of borrowing that was required to make the initial down payment at closing.

He or she may not have been accurate in his or her planning and may not have fully anticipated the extent of the financial burden of repaying the debt in addition to all the other business expenses. The buyer may not have the precise knowledge or experience required to be an effective business owner.

Every business has its unique characteristics. No two delicatessens, supermarkets, or convenience stores are exactly alike. The demographics and neighborhood culture could be just different enough to cause the ill-equipped buyer to fail. The seller must know whether the buyer will actively manage the business, or do so through absentee management.

These are significant concerns for the seller who has provided the buyer with a purchase money mortgage or will continue to be liable on the commercial lease.

If buyers are not extremely experienced in the type of business they are purchasing or will not actively manage the business, employment expenses rise, as well as the chances for theft. The buyer's ability to pay the promissory note in a timely manner, remain current on the rent and all the other business expenses, may be significantly impaired by these factors. To avoid taking back a ruined business the seller must thoroughly investigate the buyer's background.

The cautious seller should find out about the buyer's education, work experience, financial status, work and personal habits, health, and family situation.

Since more businesses fail than succeed, sellers must be certain that repayment of the promissory note and lease obligations are secured by something more than the asset sold.

By Christopher John Gullotta, Attorney at Law

The information above is general in nature and does not constitute legal advice. Do not attempt to solve your individual and fact problems, based upon this general information.