12 Steps to Prepare for Selling Your Business

A Comprehensive Guide to Selling Your Business

Selling a business, to a stranger, a friend or to someone inside your business is a significant event that requires careful planning and execution. You have worked hard to build your business and whether you have decided to move on to a new venture, retire, or capitalize on a profitable enterprise, preparing you business for sale is crucial to achieving you desired outcome.

Here are some steps you should consider to ensure your business is ready:

1. Understand Your Time Horizon – There are lots of stories of businesses selling quickly, but there are also many examples of them taking years. Either way, the time to start to prepare for selling your business, is right now. Whether you plan to exit six months from now or fifteen years, many of the follow on steps are things that should be ongoing so that you give yourself the most amount of time, to get the best value when you do decide to sell.
2. Understand You Business Value – Before you consider selling, it is important to know your business’s worth. It is also important to understand how it would be valued. Is your business valued on its assets? Is it valued on its earnings? Is it valued on forward contracts? Or a combination? Would a buyer be able to get a loan or would they need an investor? Understanding all of this, helps you to understand who you would be selling your business to and how much you can anticipate to receive for its. Engaging a professional to understand this early on, will save you time and effort over the long term and help you get the best value for your business.
3. Organize Financial Records – Prospective buyers will scrutinize your financial records. Ensure all accounting and bookkeeping practices are up to date and transparent. Compile detailed financial statements for at least the past three years. Clear and organized financial records inspire confidence in buyers and can significantly speed up the sales process.
4. Optimize Operations – Streamline and optimize your business operations to make selling your business more appealing. This could involve updating technology, improving processes, eliminating inefficiencies or redundant activities. This could mean eliminating unnecessary subscriptions or dealing with old or outdated assets, including inventory. A well-run business is attractive to buyers as it indicates a smooth transition and the potential for sustained profitability.
5. Document Systems and Processes – Create detailed documentation of your business operations, including standard operating procedures, employee roles, vendor agreements and customer contracts. This documentation not only demonstrated the business’s organization efficiency but also helps the new owner manage the business effectively post-sale.
6. Strengthen Your Management Team – If your business heavily relies on your involvement, it might deter potential buyers. Develop a strong management team that can operate the business independently. This not only reassures buyers that the business can run smoothly without you but also adds value by showcasing a competent and reliable team.
7. Enhance Your Brand and Market Position – A strong brand and positive market presence can significantly boost your businesses appeal. Invest in marketing and public relations to enhance your brand image. Positive customer reviews, a solid social media presence, and good relationships with suppliers and partners can make your business more attractive to buyers.
8. Address Legal and Compliance Issues – Ensure your business complies with all legal and regulatory requirements. Resolve any outstanding legal issues, renew necessary licenses, and address any compliance concerns. This due diligence reduces the risk for potential buyers and streamlines the sales process.
9. Confidentiality Agreements – Maintain confidentiality during the sales process to protect your business. Use nondisclosure agreements (NDAs) when sharing sensitive information with potential buyers. This protects your business from competitors and ensures that confidential information remains secure.
10. Seek Professional Help – Engage professionals such as business brokers, accounts, and attorneys to assist with the sale. Business brokers can help find and screen potential buyers, while accountants and attorneys can ensure that all financial and legal aspects are handled correctly. Their expertise can be invaluable in navigating the complexities of selling a business.
11. Prepare for Negotiations – Be prepared for negotiations. Understand the buyers will likely conduct their due diligence and might raise concerns or request price adjustments. Approach negotiations with an open mind and be ready to justify your asking price with solid evidence of your business’s value. Be open to structuring a deal in different ways and if uncertain lean on the professionals around you for assistance.
12. Finalize the Deal – Once negotiations are complete, finalized deal with a well drafted sales agreement. Ensure that all terms and conditions are clearly defined, including the sales price, payment terms, transition details and any contingencies. Review the agreement carefully with your attorney to avoid any future disputes.

Selling your business can seem overwhelming, but understand it is a process. By following these steps and preparing your business thoroughly, you can increase its marketability and achieve a successful sale. Avoid getting ahead of yourself and just take it one step at a time…good luck!