If you are thinking of selling your business, there are a number of things you should be doing now.
If you want to sell your business within the next twelve months, you should contact a business broker or M & A consultant to start the process now. It will take time to prepare the materials to market your business. It can take a year to sell a business. It will increase the selling price of your business if you don’t have to rush the sale
Regardless of when you want to sell your business, there are some things you can do to help it sell faster for more money and increase the likelihood that the buyer will get financing to buy it.
- Be sure you have good financial records. This consists of income statements and balance sheets that are accurate and up-to-date. Be sure all of your income and expenses are recorded on the books. Be sure you have the documentation to support the expenses; this usually means receipts. If you have a significant inventory, be sure you are taking a physical inventory at least at the end of each fiscal year.
- Clean up your business. A clean and neat physical business makes an impression – on customers and potential buyers. In addition to making your business look good, it sends the message that this is a well-run business.
- Be sure your business records are in order. File and pay all state and federal corporate tax returns. If you are a C corporation, you may want to switch to an S corporation to avoid double taxation on the sale. If you have the time, put together the information a buyer will need for their due diligence. One of the biggest delays in completing a sale is the time it takes a seller to gather the information for the due diligence. Your business broker or M & A consultant can give you a list of what a buyer will normally look for.
- Make your business less dependent on you. Hire good people and delegate to them. A potential buyer will always look at whether they can replace you. The more easily it is to do so, the more attractive your business will be to the buyer.
- Get rid of unnecessary people and expenses and replace negative and poor employees. You want to show good profits to a prospective buyer. The selling price of your business is based on your profits – not how much a buyer can add to the profits. I would add one caveat. If your business is providing personal benefits, such as a company car, that may not be necessary for the business, you don’t have to get rid of them. Just be sure a buyer can easily stop them so that they can see that if they choose to end these expenses, they should be considered as part of the income they would receive from the business.
- Keep up your marketing and sales efforts. Whether your sales and profits are growing or declining will have a big impact on how salable the business is and the price it will sell for.
- Make sure your equipment is up-to-date and in good working order. But, don’t invest a lot of money in new equipment that will not pay back the investment quickly. Don’t obligate the business to any long term equipment leases. A buyer may not want to use the same equipment and will want you to pay off the lease.
- Be sure you have a competent accountant and business attorney. Lawyers specialize; be sure your attorney is a business attorney. When you sell the business, be sure the attorney who represents you is knowledgeable and experienced in doing business transaction work. Not all business attorneys are.
You’ve worked hard to build your business and its sale is likely to be your best opportunity to get the most money for another venture or retirement. Be sure you take the steps to prepare the business for sale and hire the best advisors to represent you when you sell it.