Account receivables aged greater than 30 days present a red flag for business buyers.  Cash flow is the life blood of a business and having a longer receivable collection period can starve a business of cash.  

Beyond the concern about cash flow, a slow collection of receivables can be an indication of problems such as:  

1. Customers delaying payment because of dissatisfaction with the product or service;
2. Claims or warranty issues that are causing customers to not pay in a timely manner; 
3. A company credit policy that encourages slow payments (i.e. no penalties for slow payments); 
4. Customers are experiencing financial difficulties that prevent them from paying, which may result in non-payment or even the loss of such clients should they become insolvent; 
5. Aged receivables might be uncollectible and an indication that the business has already lost the client; or
6. It may be an indication that the business simply has clients that willfully choose to delay payments through no fault of your company, which may mean that they are clients a buyer may not want to do business with.

If preparing for a business sale, all efforts should be made to collect aged receivables, write off those that are uncollectible, review and change credit policies to encourage more timely payment, and make it a priority going forward to collect payments within 30 days.

Following is my favorite quote from Teddy Roosevelt, taken from a speech given at the Sorbonne in Paris, France in 1910.  This quote embodies the American entrepreneur. 

The Man In The Arena
It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. 
                                           - Theodore Roosevelt

I'd like to thank Rebecca Conner at Merriman, a wealth management firm based in Seattle for sending me a link to a white paper published by Credit Suisse titled, "Life After an Exit:  How Entrepreneurs Transition to the Next Stage".  If you are considering selling your business at some point in time, it's a worthwhile read.  The focus is summarized in a quote from the article, "The challenge for an entrepreneur upon the sale of a company is twofold: how does one find new purpose, community, and structure for time; and how does one master wealth management and its new challenges and responsibilities?"

The white paper helps address not just the complex, and often surprisingly emotional issues related to selling, but also some of the practical and financial issues post sale.  The article has several case studies that go beyond the mechanics of exit planning and delve more into how other entrepreneurs found purpose after selling, what emotional issues they went through post-exit, how they developed meaning in life through relationships and other activities, and the issues surrounding developing and evolving a personalized strategy for comfortably managing wealth.  This is one of the most relevant and holistic white papers I've read about exit planning.  

The business sale website, BizQuest, published an article 5 Big Mistakes That Can Ruin Your Business for Sale Ad - that while I largely agree with the points made, the first mistake they cite is "You're Long Winded".  I would suggest that a far more common problem with such ads is that there is not enough information.  In fact, the average ad on most business sale websites contains only 3-5 sentences, which is often less information than you'd find in a residential real estate listing.  

In contrast, Codiligent strives to provide a more complete description so that a buyer will have an accurate understanding of whether the business may be an appropriate match before contacting us.  When they do contact us, before we ask for a signed confidentiality agreement, we'll provide them with a more descriptive non-confidential introduction package that will provide even more information without revealing the identity of the business.

By providing a better overview up-front, it helps inappropriate buyers self screen.  Because of this, they will never learn the identity of the business and won't see confidential information that they would see if compelled to submit a confidentiality agreement to learn the basics of whether the business may be an appropriate match. 

While we want to generate interest in a business, we want that interest to be serious and understand the importance of closely guarding our clients'  confidential information.