Small businesses face tough decisions before they sell

— -- It's a gem of a business story.

The founders of Silpada Designs took a small jewelry business and grew it into the world's largest seller of sterling silver through home parties. Then last year they sold it to Avon Products for $650 million.

Founders Teresa Walsh, Bonnie Kelly and Bonnie's husband, Jerry Kelly, reaped a huge payday. But it took much planning to get there.

CEO Jerry Kelly says they grew in a "conservative and stable and sound way," which increased the value of the firm.

When the trio began to consider selling the Lenexa, Kan.-based company a few years ago, they outlined what they wanted to obtain — and it included more than money. Among the most important items: keep Silpada a stand-alone company and continue to manage the operations.

They didn't want to cash out and quit. "We're all in our mid-50s right now, healthy, young, engaged," says Kelly. Instead, they hoped to transform into a global jewelry giant.

"This was not about selling the company and making money and retiring," Walsh says. "This was about making the future."

They thought about going public or taking on private equity but decided to align with a direct sales company. With its worldwide presence, Avon seemed ideal, Kelly says. It catered to women and would know how to work with Silpada's more than 30,000 existing sales reps.

"Avon stood out as the ideal partner, to be a big sister, if you will, to Silpada," he says.

There are many reasons an entrepreneur would want to sell: to link with a bigger brand, to retire, to start another firm or to lead a less-stressful life.

Yet, many of those sellers have to deal with similar emotional and financial issues. Among them: determining what a business is worth, getting years of paperwork in order and figuring out what role to play once the firm is sold.

Even the most skilled entrepreneur can make mistakes in the process.

Early on, owners should compile documents that demonstrate a profitable, growing business in an expanding industry, says Mike Handelsman, group general manager of BizBuySell.com, which helps businesses find buyers.

"You need to show a record of revenue growth and a history of stable profitability," he says. "That's going to allow a buyer to have confidence that they can succeed."

At the time of the Silpada acquisition, Avon CEO Andrea Jung said her firm was impressed with the jewelry company's proven track record of growth.

Thinking ahead about staff needs is another vital presales step, business experts say.

The Silpada founders knew that they wanted to stay on and continue to be active in the company — and achieved that arrangement. Jerry Kelly remains CEO. Bonnie Kelly and Walsh are the primary spokeswomen for the sales reps. The women also lead the product development and design departments.

What happens to employees?

The founders say they not only considered their needs but also the fate of their sales force.

"We needed to make sure that the future for (the representatives) was sound," says Bonnie Kelly. "And the only way to do that was to look at another company that was just as reputable as ours and that cared about women."

Barbara Corcoran, a real estate company founder who sold her business for $66 million in 2001, also thought hard about her future before selling.