Are you planning to sell your business?
Are you really ready to turn all your hard work over to new owners?
Selling a business can be a complicated process, and while there are deals that can happen right away, the majority of business owners looking for an exit strategy need to extensively and carefully prepare a business for sale so that they can get a good deal.
But first, here’s a reality check. If you want to sell your business right away, you’re not likely going to get the best price for it.
At the very least, you need a year to devote your time and energy to preparing a business for sale, before you put it up on the market.
Why Early Preparation Is Crucial
The groundwork has to be laid out in order to lessen the risks of failures in a business sale. This means that if you’ve been thinking of selling your business today, then you should have started with preparations months ago.
There are plenty of things that can go wrong in a deal brought on by external and internal factors even in the strongest market conditions. However, if you prepare, you can anticipate, manage and coordinate actions to mitigate the risks.
So, what steps should you take in preparing your business for sale? Here’s our checklist…
1. Do An Evaluation
Come up with checklist of every aspect of your business to get a clearer picture of the value of your company. This checklist must include:
- Financial condition, which covers financial reports and projections, credit agreements and loan obligations
- Operations and organisation, which outlines the organisational chart and procedures, articles of incorporation and management reports
- Products and supplier agreements
- Clients and customer agreements
- Business image
- Digital assets and IP-related agreements
- Legal, including partnership agreements, shareholder and stockholder terms, as well as government registrations and authorisations
From this checklist, you have to figure out which needs improvement before you sell your business.
2. Improve Your Financial Credibility
Plan a meeting with your accountant to go through the books and do an audit of your accounts so that you know your numbers by heart. Look into your business’ cash flow, revenue and expenses. Review your debts and receivables, and then update these accordingly. Make sure that your financial statements and tax returns are in order as well.
You have to get your numbers in shape before you put your company up for sale, as this will be the most important factor in determining your business’ value.
3. Get Your Business In Order
Review the business’ standard operating procedures (SOP) or manuals. If you don’t have a well-documented operation or system, then it’s time to put this on paper so that it would be easier to turnover the company to the new owners. In fact, potential buyers of your business would appreciate the documentation of how the business operation.
4. Pick A Strong Management Team
Preparing your business for sale is not a one-man show. So, you’ll need to put good, qualified and skilled leaders in your departments to keep things running smoothly. A team of strong and effective leaders will be attractive to potential buyers because it will show the business’ sustainability, especially if you’re no longer going to be a part of it soon. It will also add value to your business.
5. Sort Out Issues With Human Resources
In some cases, you will have workers staying on in the business long after you’re out. Figure out which of these key employees need to be incentivised in the transition with the new owners. You’ll also need to come up with severance terms and other compensation and benefits programs for the rest of the workers. Buyers of your business will be looking for these terms because it will become their obligation when you leave.
6. Formalise All Agreements
Make sure that employment terms are entered into contracts. In the same way, formalise contracts with your suppliers and customers as well. The verbal agreements you’ve made with staff, clients and suppliers will have no more value to the new business owners. Besides, if you’ve secured the contracts and have all the papers in order, then it shows good management on your part. This is also attractive to potential buyers.
7. Make Physical Changes To Your Business
If you have experience selling a house, then this tip works the same way for your company. You have to make it presentable by doing a few cosmetic changes and by cleaning up in the actual office.
Some buyers might not mind seeing your company the way it is, warts and all, but only because they want to acquire the business for cheap. But giving your site a fresh coat of paint, for example, will help increase its value.
8. Never Ignore Your Digital Assets
If your company has an online site and social media accounts, then these will also add value to your business. Take an inventory of your digital properties in the same way that you take an inventory of your tangible assets.
Assess how your website contributes to the business’ sales and customer growth and look into the company’s social media presence. How does your online site rank in search engines? Do you have other IP properties, like videos? Digital assets cost a good amount and should also be reflected when you’re preparing a business for sale.
9. Have A Transferability And Growth Plan In Place
You need to show the buyers of your business that there are more opportunities to reap once they takeover and that the business isn’t actually heading a downward spiral. The growth plan should reflect at least three years of insights and projections.
10. Resolve Legal Issues
Go over business registrations and licences with the government and see to it that these are up to date. If there is any pending litigation or penalties involving your business, you need to get these resolved before the sale.