Preparing for the Sale
Before your business goes on the market, attend to the following checklist of items:
 Selling a business can be one of the most important events in a business owner’s career. This high-stakes transaction has the potential to yield great rewards — both financial and emotional. But selling a business also can be a complex and mentally draining proposition. Even the most successful and experienced business owners may find themselves unprepared and unequipped. Before you begin the process of selling your company, make sure you’re ready. Being prepared can mean the difference between a smooth sale and a bumpy—not to mention costly—ride.
Here's a checklist of things to identify:
Normalize your financials. To present your financials in the most favorable light to potential buyers, you may want to consider switching from a cash method of accounting to an accrual method. An accrual method reports income when it’s earned and expenses when they’re incurred, rather than when paid in cash. Converting to this method can present buyers with a more accurate financial representation of your company.
In addition, there may be other expenses such as depreciation that are legally written off for tax purposes, but may be more accelerated than the actual deterioration of your plant and equipment. Further, there could be other discretionary expense items including certain travel and entertainment, payroll for family members, benefits and perks, etc., that may or may not be incurred by the new owner. The type of items mentioned above should be captured in a separate document so that a calculation could be be easily made to determine normalized earnings.
Clean, professionally audited statements also suggest to buyers that your business is professionally and ethically run.
Ensure contracts and leases are up to date. The terms and conditions of your customer and vendor contracts and equipment leases should be current. If your company assets include real estate, you might want to separate or sell the property before your business goes on the market because it has more favorable tax and liability implications for both you and your company’s buyer. If your company leases real estate from another business you own, the lease may be set at an above-market rate to maximize your real estate earnings. The cost of the lease should be normalized to show that a new owner would likely lease the property at a fair market rate.
Get debtors and creditors in line. Potential buyers use the numbers you provide to calculate their potential future cash flows and working capital. For this reason, a history of slow pays may discourage them from looking seriously at your business. Consider taking payoff settlements on open credit accounts or eliminate open accounts.
Update facilities and equipment. Make sure your workspace is running at optimum efficiency and that you’ve made necessary repairs in offices, warehouses and factories. A neat, well-maintained appearance — which also includes landscaping around facilities — tells potential buyers that yours is a successful company. Now is also the time to give internal systems a tune-up and invest in technology and other upgrades.
Document your company’s policies and procedures. This will help facilitate a smooth transition in day-to-day operations when the sale is complete. If necessary, create a procedure manual that describes best practices in running the business.
Retain key employees. Losing critical employees during a sale can be a deal breaker because they often are integral to the new owner’s success. Keep them in place by maintaining the confidentiality of a potential sale until the deal is complete or near completion. This will help to deter panic and sudden turnover. Keep in mind, however, that key employees need to feel they are trusted and in the know.
Increase the value of your business now
It is simply good business practice to organize and run your company while you're the owner just as effectively as you would in preparation for the potential sale of your company. Taking these steps can help increase the value of your business to potential buyers and even translate into improved profits while you’re waiting to sell your company. Contact our experts today to help you reach your goals.
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