Work mostly to maintain client relationships?

Continue in a management position?

Work part time?

Commit to a certain length of time or consult?

Throw in the towel and tell yourself, “Job well done, I'm out of here”?

The next step is to conduct a thorough due diligence on your own business. Many potential buyers will expect you to do this on your own. Therefore, it is in your interest to do this on your own time when there is no pressure to finish the analysis. The due-diligence report consists of a thorough business assessment, in which you pull all the materials the buyer will require before you're asked for them. You will have to put all the information in writing when a suitor comes to call, so get it done now.

The information should include a narrative background of your company (how long it has been in business, its growth over the past few years, any significant changes in producer capacity, any acquisitions over the years, locations, principal suppliers, and marketing history). Assemble it in a professional-looking bound document.

Of course, the financial short list will include the usual declaration of assets and liabilities and tax data. You'll need to show compliance with federal and state requirements and provide sales records for the past three-to-five years.

Looking Back and Forward

When appraising your business, what if there has been a decline or there's some negative history? The best action is to address it up front. Facts are facts; if you document the problems and the steps taken to solve them, you will give a potential buyer a sense of security that there are no other hidden problems.

As with all transactions as complex as a merger or sale, a crucial component is retaining the best corporate attorney as possible. The overwhelming number of business owners have little if any experience in acquisitions and sales. You will need someone who will provide good advice and draft a strong confidentiality agreement. As part of the sale process, you'll be releasing a lot of information. You want to minimize the business risk of releasing information to competitors. This is especially the case if there are one or more potential buyers. This early preparation works both ways.

In addition to performing a detailed examination of your own company, you need to spend adequate time investigating a potential buyer. This is where the human resource piece really comes into play. At the closing of a sale, most buyers will move quickly to put their employee policies and benefits in place and impose their own management styles. Both you and your staff need to be prepared for these changes.

Be prepared with detailed questions for the interested buyer: Have they filed in concurrence with ERISA? Are they in compliance with contributions to their 401(k) accounts? The buyer may not divulge all of the answers you seek. However, by asking detailed questions, you can judge how business savvy they are and whether they take their fiduciary responsibility seriously. If someone seems too flippant, it may be a sign of disorganization.

By being proactive, you can also judge whether the buyer is really only interested in market share and buying your book of business and is just giving lip service to concerns for your staff's welfare. Listen for any hint of past litigation — not just Equal Employment Opportunity issues, but workers' comp claims, especially carpal tunnel syndrome, and any other labor-related incidents. How do they talk about their own staffs?

High on the list is to get a feel for the culture in the buyer's office. Is it autocratic or democratic? What is the management team's style? Does it feel compatible? Are they saying whom they'll keep on your staff? When larger companies buy out smaller operations, it often means the staff will receive better pay and have more career opportunities. However, that may come at the loss of the flexibility that small offices can offer.

It's really important for the business owner to not only review some of the current hot-button issues, but also try to come up with a plan to ease the transition.

Common questions that will emerge from existing staff include:

Do I have a job?

Will my pay be affected?

Will my benefits be affected?

Will I still be able to attend that graduation or wedding I've saved my vacation for?

The best advice? Write down any promises made to staff. The buyer must address these issues ASAP. Nobody wants to lose these employees. You want to satisfy the producers and key staff and keep them energized. You cannot be concerned about benefits while growing the business.

Buyers must know what environment they're buying. In some cases, there is no flexibility – often regarding benefits – but the new employer may be able to give some latitude to make the transition more palatable. Sometimes arrangements can be “grandfathered in” over time.

These points must be communicated to workers as part of the vision and the long-term prospects in the new business. One issue that can come back to haunt a merger or acquisition is the question of exempt vs. non-exempt classification of employees. These issues abound, with lots of legal questions at stake. Exempt employees, such as management that receives a salary regardless of the number of hours worked, must be treated differently than non-exempt employees who should be paid overtime in excess of 40 hours per week.

Both the seller and buyer need to address these issues upfront. Some of the seller's employees perhaps haven't wanted to be non-exempt because benefits were better, or maybe the boss didn't want to pay overtime and classified the workers as exempt.

In cases where sellers have some vulnerability, purchasers have the responsibility to set things up on a “go-forward” basis, reclassifying jobs correctly as of the closing. Retirement issues for the seller's company also have to be carefully resolved. An existing pension plan could be terminated so funds may be transferred to the new company's plan. The seller's plan administration needs to be current, too.

There are the painful times when all of a seller's staff will not be merged with a buyer's. In those instances, a seller should keep documentation to show that decisions were made as fairly and as objectively as possible. This is a factor when multiple individuals in both companies are qualified for the same positions. Not only does it protect the seller and buyer, but it also helps employees to use the material as part of a recommendation for another job.