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HOW TO PREPARE YOUR BUSINESS
FOR SALE
If you are planning to sell
your business someday, you should start planning for it
as soon as possible. Here are some of the things you
should do now:
 Review
your tax situation with your accountant and lawyer to be
sure that your taxes will be minimized when the sale is
made. This is particularly important if you are a “C”
corporation.
Be
sure that your accounting records are in good shape.
Buyers want at least three years of financial records.
Your business and tax records must be consistent with
each other. Be sure that you can explain any variances
between them. Expenses must be recorded consistently
from year to year. Be sure that the buyer can verify any
perks you take out of the business.
Buyers
are looking for an income and an opportunity. They need
to feel comfortable that the business will continue to
generate the income they need. They also want to be
their own boss and see an opportunity to have a growing,
successful, business. Here are what additional steps you
can take to make the buyer comfortable.
Document
your procedures, business practices, and everything
someone would need to know to operate the business. One
reason that franchises sell for more is the support
system they give to the owner. The more you can
duplicate this, the more desirable your business is. It
makes it easier for the new owner to learn the business
and train employees.
Develop
managers and cross-train employees as much as possible.
The buyer wants a business that can operate without you.
Cross training makes the business less dependent on
particular employees.
Control
your expenses. Since the buyer is looking at three years
of results, you need to control expenses well before you
put the business up for sale. As a rough estimate, every
dollar in expenses that are saved can generate two
dollars of additional sales dollars. You need to
continue to make the capital investments that the
business needs. But, don’t make them when you get closer
to the sale date unless the payback period is short.
Negotiate
a lease with provisions that will not hinder the sale.
The landlord will want to approve any buyer, but you can
request that this consent is not unreasonably withheld.
If you are personally guaranteeing the lease, have it
end when the buyer takes over. Be sure the lease is in
writing. Be sure that the lease, with options, has at
least five years left on it when the business is sold.
Spruce
up and clean up the business. Take an objective view of
your business. Get rid of the clutter. Organize it. Make
it look attractive. Give it curb appeal for any buyer
that drives by.
Finally,
but not necessarily the last thing to do, is to
diversify your personal life and finances. Think about
what you would like to do after you sell the business.
Develop outside interests. Make investments outside of
your business. These are some of the more important
things to do to maximize the price you will get when you
sell. By doing them now, you and your business will be
prepared for the sale.
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