There is no doubt that 2009 was a challenging time for business owners and business advisors alike.  However, as we look back on 2009 we realized that some of our biggest success stories were about the deals we didn't do.  Let me give you a real world example.

A business owner named Don (name changed to protect his identity) asked us to sell his company. Rather than immediately agreeing to work with him, we asked Don to take "The Sell Test". He  failed. He was shocked. He wanted to know what it meant.

Before we work with a potential client we ask them to take "The Sell Test" to make sure the proposed transaction will ultimately accomplish their goals. Let's look at "The Sell Test" one question at a time.

Question 1: Are You Selling for the Right Reasons? Before Don sold we worked with him to help him truly understand why he wanted to sell and the other options that were available to him. Don realized that he may have been motivated to sell because he was exhausted rather than because it was a good business move. With coaching he realized that there may be other ways to handle his exhaustion.

Question 2: Have You Considered Who the Best Buyer Would Be? It is important to consider all of the possible buyers including management, other shareholders, financial buyers and strategic buyers. Don still needed to explore whether management or other shareholders would be interested in the company before taking it to a broader market.

Question 3: Would a Sale Meet Your Personal and Business goals? Specifically would it:

(a) Allow Don to leave the business on his terms? Don was not sure exactly what he wanted to do with the rest of his life after he sold the business.

(b) Provide financial security to Don and his family? Don wasn't sure how much he actually needed to ensure his financial security.

(c) Achieve Don's other legacy objectives (such as maintaining the name of the company, protecting the jobs of key employees, or keeping the business in town).

Question 4: Is a Sale of the Business the Best Way to Maximize its Value? At the very least, Don needed to know if the proposed sale price would allow him to meet his personal financial requirements. Once that question was answered we could explore whether a sale or another exit option was the best way to maximize the value of the business.

Question 5: Is the Company Ready for Sale? Don's company wasn't ready for sale. He needed to spend some time working on a few things that could improve the fundamental value of his company before putting it on the market. Recommendations included simple things like developing a policies and procedures manual to more complex things like improving his financial reporting systems.

Question 6: Is Now the Best Time to Sell the Company? Don needed to know if now was the right time to attempt to maximize the value of his company based on market conditions, the overall economy, and the company's specific situation. Our advice was that market conditions were very good but that the value of is business would improve if he could diversify his customer base more.

Question 7: Have You Done Everything Possible to Maximize the Proceeds You Would Receive from a Sale? Don had not done any tax planning. He still needed to address ways that he could minimize the capital gains taxes and estate taxes that would result from the sale. Dramatic tax savings can be realized when a business sale is closely coordinated with the owner's overall estate plan. To do this well often requires advanced planning and may take as long as several years to implement. Don is now working with a financial advisor to get this planning done before he decides to sell.

Based on "The Sell Test", Don decided not to sell the company right now. Instead, he used 2009 to address the issues highlighted above. Now that Don has addressed most of those issues, he is ready to maximize the value of this business and accomplish his personal and business goals at the same time. Rather than wasting Don's time and money and delivering results that he would not be happy with, we worked with Don to do the right thing.  Don is now wants to sell in the second half of 2010 and we're confident he'll pass the Sell Test now.

Take "The Sell Test" before you make any important decisions about exiting your business. At the very least it will confirm that you are making the right decision. On the other hand, it could save you from making a mistake that you might regret for a long time to come.