Ideally, business owners should consider exit scenarios for at least three to five years before they want to sell their business.
It will allow time to evaluate advantageous deal structures and address financial and legal issues. It will also help make the business more attractive to a potential buyer. Here are more tips to prepare your business for sale.
Get Your Financials in Order
If you’re considering selling your business, it’s important to take steps to get your finances in order. It will ensure you find the right buyer and secure the highest price possible. Read more to learn more about selling your business.
One of the first things that a potential buyer will want to see is your financials. It includes your tax returns, income statement and balance sheet. If you don’t have these documents in order, it’s a good idea to work with an accountant to get them in shape before you start marketing your business.
A prospective buyer will also want to check that you’re not behind on payments to suppliers and that your business is in good standing with its accounts. If you haven’t been paying on time, it can be an indication that you’re not a responsible business owner.
It’s also a good idea to check your employee contracts and ensure that they are in good standing with the company. Any issues with these contracts can be a deal-breaker and could mean that the sale doesn’t go through.
You’ll also want to make sure that your intellectual property is protected and that you don’t owe any money to anyone. It can include your customers, your staff and your suppliers. A clean record of these matters will show a potential buyer that you’re committed to the longevity of your business.
Create an Information Packet
A good business information packet is a must for any owner looking to sell. It should include the company’s history, products and services, marketing plans and strategies and overall business structure. A well-crafted packet will also provide a buyer with a better understanding of the business and make the process of selling the business easier for both the seller and the buyer.
When you’re ready to sell, you can present your information packet to pre-approved buyers, and the process will move along more smoothly than it would if you hadn’t taken the time to prepare for it in the first place. A well-planned and properly executed sales cycle can lead to a smooth transition for both the buyer and seller and an increased price for the business.
Prepare for the Due Diligence Process
Preparing for the due diligence process can help you get the best possible sales price for your business. A thorough and careful review of your business will allow you to identify risks and resolve issues before a buyer becomes involved.
Before you start the due diligence process, you should work with an accountant or other expert to ensure your financial records are accurate. A professional who knows your business and your industry will be able to spot any inaccuracies that could affect the final selling price of your business.
As part of the due diligence process, your team should also ensure that you are legally compliant with all laws and regulations that apply to your business. It will allow the buyer to be more confident that the transaction will proceed smoothly and will reduce their risk of having to pay fines or penalties down the road.
Before the due diligence process starts, creating a list of all the items you want your team to look at is also a good idea. Making a list will help you prioritize the questions you ask and determine what is most important. It will save you time and energy while also helping you focus on the most important things.
Make the Business Presentable
If you’ve been in business for some time, it may be time to put your hard-earned skills to good use and sell your company. The process can be stressful, but there’s no need to let it deter you from selling your business if it’s the right time.
To prepare your company for sale, you must focus on several factors. It includes getting your finances in order, creating an information packet, preparing for due diligence, and making your business presentable to potential buyers.
A well-organized information packet will help potential buyers feel more confident about purchasing your business. It can include anything from a well-crafted sales brochure to an up-to-date operating manual.
It’s also a good idea to put together a list of your equipment that’s being sold along with the business, and it’s also helpful to have copies of your tax returns from three to four years ago on hand.
It will make the entire sales process more seamless and will give potential buyers confidence that your business is worth what you’re asking for it.
Similarly, consider the value of customer lists, secret recipes, proprietary techniques and even well-maintained equipment. These are not usually included in pricing models but can add significant value to a business.
You’ll want to do all of these things before you put your business on the market, though it’s never too late. By following these tips, you’ll be able to get the most out of your business and ensure that it’s prepared for the next generation of owners to take it over.