Cross NW - Cross Northwest, Inc | 12 Steps to Prepare Your Business for Sale
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12 Steps to Prepare Your Business for Sale

12 Steps to Prepare Your Business for Sale

Most business owners don’t realize that nearly 70% of businesses put up for sale never get sold. The number of transactions is reaching record levels as baby boomers are selling their businesses.  Buyers have many choices.  Business owners are fighting the odds from the beginning. If sellers don’t take steps to stand out from the crowd and prepare the business to attract buyers, they may have a hard time selling or be heavily discounted.  Every day we help business owners prepare and sell their businesses for more money.

 Here are 12 important steps owners can take to maximize the value and chances to sell:

  1. Start Early. When you think about preparing and selling your business it is measured in quarters and years.  You will need a lot of time to make changes and demonstrate the highest level of performance you can just prior to the sale of the company.  If you are going to prepare and sell your business it will probably take at least a year for a small business with minor work.  That give you about one quarter to do the work and nine months to sell the business.  The process could easily take several years for a larger business with a longer sales cycle.
  2. Maximize profitability. As the seller you should be aggressively implementing improvements and growing the business right up to the close of the sale.  This is the time to pull out the stops and increase your profitability.  You need to be looking at ways to reduce costs and increase overall margins.  Every dollar you increase the profitability will be multiplied when figuring the sales price.   Have you neglected increasing your prices lately?  Can you pass on a small increase without affecting your long term sales?    Remove hidden costs like unnecessary memberships, special perks, etc.  If you are not willing to pay 2-3 times the price then you probably want to move it off the books and just pay for it yourself.
  1. Get yourself out of the business.  When your business started you were the one who had to make the decisions, had the knowledge and the vision.  You were the hub of the business.  You will be gone shortly after the sale. Any special knowledge, daily management, or key relationships you hold need to be transferred to others who will be staying with the business.  Having a solid team of people around you that can run the business will increase the value and attractiveness of the business.  A good measure of your team is being able to take a couple weeks to a month off without the daily operations of the company taking a hit.
  1. Get the business records in order. Do you know where your lease is?  Can you easily find your last 3 years of tax returns?  Tax returns, corporate ownership records, operating agreements, partnership agreements, leases on equipment, loan documentation, are all going to be needed.  It is best for you to dig thorugh those files and find them now.  You might need to get replacements from different organizations that can take a while.  Get them scanned and organized electronically so you can share them easily.  You can spend many hours later frantically putting these things together or you can do it now and save the stress later.  Just like everything else, complete and concise records show the buyer you are organized and adds to the value of the business.
  1. Physically prepare the business for sale.  Just like cars, houses, yachts, etc.  Everything sells better with a good deep clean and staging. This is not a light dusting.  This is a deep cleaning.  In many cases this means bringing in professionals.  Clean all vehicles.  Fix building issues and make sure to replace tired office equipment.  Also make sure the lighting is all in working order.  A well light business creates a more positive atmosphere.  Remove all items you are not using that are causing clutter and store off site or dispose of properly.  Only the most serious buyers will be walking through your business.  A clean and organized business will sell faster and for more money.
  1. Show potential buyers the way forward.  Potential buyers want to see that they will be able to come into the business, run it successfully, and improve top/bottom line. Buyers don’t know that you are making improvements, launching a new product line or ready to land new customers.  If these things are in process and you communicate to potential buyers, you have a much greater chance that they will better understand the business potential and value.  Write down your ideas, plans and your progress on each. Explain how you think the transition may go with the new owners.  Your plans will give buyers an initial path to follow while they are developing their own plans.  Ask buyers for input.  You might get some great ideas!  Showing buyers that you have thought about how they might go forward and be successful will help to close the deal.

It is a sad situation when business owners get to the end and have to close the business and sell the assets.  You can significantly increase your chances of creating a long term successful company if you do it right.  Selling a business take time, preparation, and showing a new buyer the future opportunity.  If you are diligent, you can exit your business and help to ensure that the new buyer has the best chance of success going forward.[/vc_column_text]