Selling Your Company? 10 Tips for Getting Your Business Ready to Sell
What are the most important things that you can do to get your business ready to sell? This is often the first question business owners ask when considering the sale of their company. When you choose to sell your business, it is important to increase the business’s value and do everything you can to make the transfer of ownership as seamless as possible for potential buyers. You can get started immediately by following these 10 tips for improving your business before selling.
- Ensure your decision to sell remains confidential. Do not put up a “for sale” sign outside your place of business or attempt to contact sellers. If you announce your desire to sell, you will have a difficult time retaining employees, customers and vendors. When you are prepared to put your business on the market, a business broker can introduce you to qualified buyers while keeping your intent to sell private.
- Maximize your business’s profitability. Although you most likely have been focusing on your business’s profitability all along – after all, that is what drives any business owner – now is the time to show that your business can remain profitable after you are gone. Take measures such as cutting costs without jeopardizing the quality of your product or service. Diversify your customer base by utilizing novel marketing techniques or introducing new products and services. If your business model permits, emphasize long-term revenue generators such as contracts with customers or vendors. This approach will continue to bring in profits after you leave the business.
- Make sure your records are complete and up-to-date. Eventually, prospective buyers will want an accurate portrait of your business’s value, and they will thoroughly inspect your records before purchasing. Begin early by making sure important business information, including all income records, tax returns, financial statements, cash register receipts and any other records that show income and expenses are documented appropriately. Engage in a “mock due diligence process,” and if anything seems amiss, implement any necessary changes to your auditing and accounting practices.
- Define your brand. Appealing to a potential buyer is more than a numbers game. Think about what sets your product or service apart from others. Before they meet you and check out your business space, potential buyers will encounter your business through profiles and web searches. Having a clearly articulated brand, including a focus on any patents or unique features, along with a well-designed website that highlights customer testimonials will make your product or service stand out among the many competitors buyers will encounter in their search. Additionally, buyers will be convinced that your business can command a significant part of the market.
- Retain key employees. A skilled, knowledgeable and committed staff is an attractive asset to potential buyers. We advise you do not tell anyone your business is for sale, even employees. But plan to provide your most important and reliable employees with a bonus or other incentive to keep them on board after you sell the business. If the buyer wants a long term contract, wait until that time comes after due diligence acceptance. If you currently perform a specialty role in the business, consider hiring and training new staff to take on your key roles.
- Document your business’s guidelines. Along with a great staff, detailed documentation about how to make and market your product or service goes a long way toward attracting potential buyers by allowing for a seamless transition of ownership. If you have not done so already, now is the time to formalize your business’s operations through manuals and employee handbooks. With these materials available, buyers will be convinced that they can easily take over the day-to-day operations of your business.
- Address any existing or potential liabilities. Make every effort to take care of present or future problems with the business, including “product liability claims, employee lawsuits, IRS audits, or insurance disputes.” Although the buyer will not necessarily inherit these problems, issues like these will reflect poorly on your business when it goes to market.
- Make your business location sparkle. Since you will be showing your business space to interested buyers at some point, make sure it is ready to impress. Take care of any renovations, no matter how small, that will put your business location in top shape. Consider adding a new coat of paint or new furniture, and be sure that the space and equipment are clean both out front and behind the scenes.
- Create a customer profile and compile sales data. This practice can put your business above and beyond others. If you have sales records and an idea of your customer base, prospective buyers will be able to work with this data to identify growth opportunities.
- Assemble a good team. Most importantly, you should avoid going through the sales process on your own. Put together a good team of experienced advisors, including a lawyer, an accountant, and a business broker. These professionals can offer an expert and unbiased view when it comes to valuing and selling your business. A business broker can work with you to identify the right buyers and arrange meetings while ensuring confidentiality.
Don’t go at it alone, email Transworld Business Advisors. We are here to help you!