Preparing Your Business To Sell
Have you ever considered that the day may come when you are faced with the decision of whether or not to sell your business? It is a daunting thought to have your business fully exposed to the harsh light of a buyer’s accounting, legal, and tax reviews. Preparing your business for future sales is a stressful concept, and few business owners are genuinely ready for the process.
However, now is the time to take a hard look at what you’ve built and determine if your business is “sale-ready”. Taking the time to understand the selling process, what is needed from you, and what you can do to prepare for your business’s future without you will help accelerate the process when the time comes. We’ve created a list of the things you can work on now to get you started.
Start With Keeping Good Accounting Records
The key to a smooth selling transition is anticipating what questions a potential buyer may have about your business. Now is the time to go through your accounting structure and revise anything that may not help with the sale of your business in the future. Make sure everything is well documented and accurate. Build systems that create a clean, easy-to-understand, and precise balance sheet that is audited or, at the very least, reviewed by an independent CPA firm. Show the profitability by location (if you have expanded) and create a list of capital expenditures.
These records will help you determine if your business is ready for sale when the time comes.
Build Your Brand, So It Is Easy To Sell
Can you describe your business quickly and concisely? What is your brand reputation? If you haven’t built a brand name or identity for your company, buyers may not know or understand what they are purchasing. Building a brand is more important than you think. List your brand assets – social media, website, marketing collateral, images – and determine where you need to improve.
Consider whether rebranding will help your business gain consumers’ trust and help potential buyers understand what you are selling.
Is your business too dependent on you to thrive? If something were to happen today, would your staff be able to pick up where you left off and continue with running your business? Founder dependency is real and a hard habit to break but necessary when considering an exit strategy. You aren’t going to be around forever, and your legacy should be the survivability of your business.
Begin to develop a plan that will dictate your planning decisions to help maximize the value of your business, create transitional continuity, what role you will play in the transition and after the sale, and the long-term financial security of you and your family.
Increasing Company Value Before a Sale
Getting top dollar for your business when the time comes to sell takes planning and strategy. Increasing your company’s value should be part of this strategy. To increase the value, start by lowering the risk profile of your business by diversifying your revenue streams and establishing recurring/predictable revenue. Through this, you can improve your business’s cash flow position.
Additionally, increasing profitability by improving margins can improve your company’s value before a sale. Look at any untapped markets that can improve sales and reduce areas that are not providing the return on investment you’d hoped for. Look for ways to increase efficiency in workflow and decrease your operations.
These simple suggestions may be obvious, but they can help improve your company’s value before the sale is even started.
Put Key Team Members into Place
Having the right team in place now will not only help your business grow and become more valuable in future sales, but they can also be a key component in selling your business. Building a strong management team, in particular, will allow your business to be stable while you are working through the sale.
Finally, they will also demonstrate to a potential buyer that there is no one person the company relies upon solely.
Get an Independent Valuation of Your Business
You may have estimated the value of your business already (or an idea of one), but you’ll need an unbiased valuation to know the business’s true worth. Find someone who can assess your business now and develop a realistic future value based on forecasted market conditions.
You can use our free Business Valuation Tool to do that.
Building the Right Team
As you start to look at what selling your business will look like, you need to look at the team helping you do this. Make sure that everyone involved – your lawyers, accountants, and other professional advisers – have an in-depth understanding of your business and your long-term goals. Get references. Talk to other business associates who’ve begun or have created their succession plans. Interview prospects for your selling strategy the way you would interview a new employee. Don’t forget, bad advice is expensive and could cost you and your family tons when looking at their future.
Finding a Buyer
Where do you find a buyer when you are ready to make the leap into selling your business? There are a few options available to you. Start with reaching out to your current business partner, if you have one, and employees. This immediate pool of prospective buyers may save you search time. Another starting point may be asking family or friends if they are interested in purchasing your business.
If neither of those options is available, working with a business broker is another option. Business brokers are similar to working with real estate agents. They will search for the right prospective buyer for your business. However, there is a fee for their service that the seller pays.
Selling your business is never easy, and the steps to get there should be started well before you even consider selling. Creating an exit strategy focused on the continuation of your business and creating structures that anticipate what a potential buyer may want or need will help smooth the transition.
Creating a succession strategy for business is one of our main focuses. We can help you determine if your company is ready for the transition and what areas need improvement. Our business valuation tool shows you what your company’s estimated market value is currently and our business growth blueprint helps build that value higher.