So you want to sell your business?
For many, selling a business is a once-in-a-lifetime event which can be an emotionally stressful for an owner. We would like to share with you 10 steps to help you maximize your success potential when selling your business.
Tip #1: Be ready to sell. There is no sense going through the motions if you are not mentally and financially committed to selling the business. Discuss the sale with your spouse or partner in advance. Evaluate your financial needs so there is less hesitation once an attractive offer comes your way.
Tip #2: To avoid delays and misunderstandings, do not wait until you have an offer in hand to consult your advisers. If your attorney is not well-versed in small business transactions, interview others. You are unlikely to reach the closing table if your advisers do not clearly understand your ambitions.
Tip #3: Learn the true value of your business. Since small business valuations can be complicated, many owners have no idea of the value of their company. Consult a business sales professional (One who is NOT a tax accountant or business attorney) for an explanation of how small businesses are valued.
Tip #4: Update your company’s financial statements and understand the nature of you firm’s revenues and expenses.
- Buyers will typically require 2 to 3 years of financial statements (profit-and-loss statements, balance sheets and/or tax returns) for their evaluation.
- Make sure you have supporting documentation for nonoperational expenses (fringe benefits such as your personal health insurance).
- Prepare a simple list of the business’s important furniture, fixtures and equipment.
- Document your inventory. If it is stale or obsolete, put it on sale or donate it. Your inventory should be lean and moving.
- Clean-up the accounts payable and any pending legal, employee or environmental issues.
Tip #5: Now this one is as simple as it comes. Organize your legal paperwork such as operating licenses, property leases, customer agreements and insurance documents. Know where they are, keep them handy, you will surly need them. So find a good file folder and have all of those documents at hand so when you are asked about this paperwork, you know right where it is.
Tip #6: Consider your employees. Decide how and when you will communicate the sale with your employees. Because of the uncertainty involved, most business owners wait until the sale is imminent (or done) before sharing the news with their employees. A buyer is likely to keep your employees after the sale is completed, so treat employees with respect during the sales process to avoid any last-minute issues.
Tip #7: Keep this in mind when you are preparing to sell your business. Improve your curb appeal. Tidy your working space – first impressions make a huge difference!
Tip #8: Brainstorm on ways to grow the business. All buyers are looking for ways to add to the work you have done by improving sales or cutting out unnecessary expenses. If you have ideas, be prepared to discuss them with your potential business buyer.
Tip #9 Know why you are selling your business and be prepared to tell the prospective business buyer your reasons. Most business buyers are curious as to why you are selling and will ask for an explanation.
Tip #10: When you are preparing to sell your business keep running your business as you normally would – now is not the time to take long vacations or let sales slip!
That’s it for our top 10 tips for preparing to sell your business.
Questions? Contact us, we specialize in business valuations plus we have over 30 years’ experience connecting buyers and sellers. Call or Text Stan for a free consultation today! 612-865-2012