6 Things to Do Before Selling Your Business
No matter what type of brand you own, selling a business can be both exciting and paralyzing. Along with the validation of selling something you’ve spent so long working to establish, the stress of the sale process can grow overwhelming fast.
That’s where early preparation comes in. Organizing your business in advance allows you to to streamline the sale process and improve your company for greater profitability. If you’re considering selling your brand, here are a few steps to consider on the front end.
1. Be Sure You’re Ready to Sell
Before you start the selling process, be sure you’re mentally and emotionally prepared to sell. Consider the current shape of your company, talk with your support network, and seek advice from business owners who have gone through the process before you.
In addition, lay out a plan for what you’ll want to do in the first six months after your business sells. If you’re hoping to retire, in particular, you’ll want to ensure that you understand how much money the sale will contribute to your retirement plans.
2. Consider the Timing
It’s better to sell your company when it’s in its prime based on its recent profits, though this isn’t always practical for every business. In addition, consider the state of the industry as you go into the sale.
When possible, give yourself plenty of time—at least a year—to prepare for the sale in advance. This allows you to organize and improve your financial documentation and expand your customer base. These improvements can not only ease the transition, but they can also make your sale more profitable.
3. Get Your Paperwork and Finances in Order
Having clean, organized financial reports isn’t just good business. It can also be a helpful way of preparing to send information to potential buyers, and it shows wary investors they can trust you. The last thing you want is for a chaotic back office that gives would-be buyers concerns about how you’ve run the business in the past.
Make sure your signature shows up on the appropriate contracts, get your meeting minutes all in one place, and write and tidy up your documentation around key processes. Review any important assets, draw up an equipment list, and make sure any undocumented or verbal deals get put on paper.
You’ll also want to gather all of your financial documents going back at least three years. If needed, review these with your accountant. Make copies of significant documents to show prospective buyers.
This is also a great time to start preparing your due diligence documents. Buyers will have a checklist of documents they want to see, and preparing these standard due diligence documents in advance can save you time down the line. Work with your business broker to understand what to expect.
4. Deal With Anything That Might Raise Concerns
Buyers considering your business won’t want to see anything that looks like a loose end or a sign of mismanagement, especially if these things could raise their financial risk.
Before you sell, take care of any existing lawsuits, investigations, or other forms of litigation, no matter how minor. Risk-averse buyers will flee at the idea of purchasing a brand with ongoing issues.
At this time, you’ll also want to take care of any financial complexity from your accounts, such as mingling personal and business expenses. This can raise legal issues, and it can also complicate your business valuation and a buyer’s attempts to get financing.
5. Get a Business Valuation
Before you go into a sale, get a business valuation. Knowing your overall business value can help you understand whether or not you’re starting out with a reasonable asking price.
You can reach out to a financial professional for help with this, but most small business owners can do this evaluation on their own. You’ll need to use some of the financial information you’ve organized above, including your business assets and liabilities as well as your net worth. In addition, you’ll want to do some research into how much similar businesses have sold for in the past.
6. Assemble Your Team
Unless you have extensive legal, tax, and business sale experience, you’ll want to reach out to a few experts to help you. Having the right advice can ensure that you’re making a great deal, and it can also protect you if the sale becomes messy and complicated.
If you don’t already work with either a tax attorney or a CPA, it’s time to find one. Working with these experts can help you get your finances in order long before the sale. These professionals can also help you understand your financial requirements both during and after the transition.
The expertise of a business lawyer can also be invaluable if you’re striving to get favorable terms, and a lawyer can also help you with the burden of gathering and organizing the necessary paperwork. As you meet and negotiate with prospective buyers—who will likely have their own team of lawyers on hand—a business attorney can defend your interests.
Last, working with a business broker is often a smart move if you need to free up time to deal with things that matter—such as running and growing your business. Brokers can also help you increase your brand’s value, identify fair offers, and even get a higher price for your business.
Prepare Before Selling Your Business
Selling your business can be a monumental event, and it often takes much more preparation than the average entrepreneur expects. From managing your finances to finding the right team, you’ll need to have a few plans in place before you make the leap.
If you’re looking for expert assistance with the sale of your brand, we’re here to help. As a full-service, confidential business broker you can trust, we’re happy to answer questions about everything from exit strategies to valuations. To learn more, contact us today or reach out for a buyer consultation.