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After 20 years of working for the same company as its president's right-hand man, John Allan Thom's final assignment sounded simple enough: sell the company.

But how to do it?

After all, it was Guildline Instruments Ltd.'s bankers who had urged a sale of the Canadian division. They were disenchanted with their loan exposure to the 50-year-old company, which had endured a string of lacklustre quarters and high inventory levels.

They weren't impressed by the fact the maker of high-end electrical testing equipment had just won a U.S. military contract worth several million dollars. The contract had, however, caught the eyes of would-be buyers south of the border.

The problem? Most of them had no intention of retaining any of the 45 employees in Smiths Falls, Ont., some of whom had worked for Guildline for four decades. Mr. Thom, vice-president of finance and general manager, felt responsible for the livelihood of these employees, who had highly specialized skills that would be difficult to put to use elsewhere.

"My biggest fear was selling it to someone who would shut it down or move it," he said.

The owner, who was also the president, had a hands-off management style, and he put the task of finding the right buyer and drafting the terms squarely in Mr. Thom's hands.

Even though he is a certified management accountant, Mr. Thom brought in professionals to help set up the sale, including Guildline's external accounting firm and a banker working on an advisory basis. The latter discreetly put out the word that Guildline was on the market.

In the end, the high offer came from two Canadians who agreed to pay off trade creditors and retain all employees. Mr. Thom agreed to work for four years with Guildline during the transition period after the sale closed in 2000. To this day, he remains on the board of directors.

Taking an organized approach to preparing a company for sale, and executing a search for the right buyer, can reap rewards for all involved, said Howard Johnson, president of Veracap Corporate Finance Ltd., who assists with corporate takeovers. The process of selling usually takes nine to 12 months, he said.

"We find it's better to do a lot of research ahead and go to a select group of strategic buyers rather than going out to the market and broadly announcing you're for sale," said Mr. Johnson, who recently was chair of the Certified Management Accountants of Ontario.

Finding a buyer who is likely to see your company as a perfect fit will almost always yield a better sales price, he said. Telecasting you're for sale might attract a broader range of buyers, but they may not be as interested in you specifically, and at the same time, your competitors may target your customers and employees who may be spooked by talk on the street that you're for sale.

But before business owners rush out to find buyers, a little staging will ensure they are ready to negotiate with confidence, he added. This includes halting any unnecessary spending, such as quasi-business trips, and ensuring equipment is in good working order. As well, the offices should be neat and orderly.

The company's website should leave a favourable and professional impression. "If they look at a website and find it too Mickey Mouse, they say, 'We're not going to spend any more time here,' because looking at a company takes time and money," Mr. Johnson said.

Basic bookkeeping, such as inventories and receivables, should be scrutinized. "There is huge opportunity here," Mr. Johnson said. For example, a seller could extract value from a business ahead of a sale by making sure to collect on money owed by customers after, say, 35 days instead of 50.

Owners looking to sell should consider their employees throughout the sale process, he said. That may include asking for non-solicitation and confidentiality agreements, as well as keeping key employees informed about the sale process, he said.

Deciding when to tell employees that the company is for sale is a big decision, and often it's wise to offer financial incentives to keep workers at the company throughout the process, he said.

"From a business owner's perspective, it costs money, but if they lose key employees, they'll lose focus on the business," he said. "Management can't lose focus on the business. If they start dropping the ball, the value of their business can erode during the sale process."

Having a professional analyze your business can give you an extra edge when the time comes to negotiate price and terms, said Jack Bowerman, a licensed public accountant who has assisted with similar transactions from his offices near Ottawa.

"The first thing you should do is get an evaluation of your business, by a business evaluator or a chartered accountant who's familiar with the industry to assess the price," Mr. Bowerman said. "That exercise is going to give you an appreciation for things you didn't think about, and improve your negotiating skills."

One common pitfall for small business owners, he said, is not understanding the concept of goodwill, which is the portion of a company's market value that's not directly tied to assets and liabilities. A firm's good reputation is one example.

Making clear the basics of your business is a must, Mr. Bowerman said.

"If you walk into a showing of a house, they might have a nice little brochure with the history and the renovations. It's the same as with selling a business - give them a profile, the history and what changes precipitated the business [being] where it is now," he said.

The more appealing that sellers make their firms, the more power they have to get favourable terms. For example, many sellers want buyers to purchase shares of their company, rather than merely the assets and liabilities.

Doing so can affect the price by perhaps 20 per cent in the seller's favour, Mr. Bowerman said, because of the accompanying tax advantages. Canadian tax law exempts each seller of shares from the first $750,000 of proceeds.

Theresa Ebden is an associate producer for Business News Network.