Selling your business can be an overwhelming process. As an owner, you have probably spent the majority of your waking hours putting everything you have into the business to build it up. Preparing to sell can bring on a lot of mixed emotions.
In our experience, there is a long list of things you probably want to do before selling your business, but ten specific things stand out above the rest. If you are even considering selling, now is the time to start getting these ducks in a row.
1. Start Planning Immediately
If you read an article about selling your business, you are at least remotely interested in the idea. That means it’s time to start planning for that possibility, even if you don’t ultimately pull the trigger and go through with the sale.
2. Claim All Cash Sales
Small business owners are notorious for failing to record all their cash sales, but that can come back to bite you when you want to show potential buyers how profitable the business has been. To make sure that your business looks good on paper, make it a habit to record all your cash sales a full year before your sale year.
3. Minimize Personal Expenses
Recording your cash sales will help your revenue numbers look good, but you also need to minimize expenses. For that reason, you should make every effort to minimize any personal expenses you’ve been running through the business for at least a year before listing your company for sale.
4. Get Your Financials in Order
Once you have your cash sales recorded and your personal expenses minimized, it’s time to start putting together accurate financial reports to show off those impressive numbers your business is doing. You will need to prepare financial statements to be ready when the right buyer arrives. These will include 3 years of profit and loss statements & business tax returns and a current balance sheet.
5. Have a Seasoned Management Team in Place
Businesses that get the highest multiples on the open market are ones that don’t require the buyers to sign up to be new employees as well. To make this the case for your business, make sure that you have a seasoned management team or general manager in place who oversee all aspects of day-to-day operations. You should be able to leave your business for a week or two vacation and find it running smoothly upon return.
6. Determine Your Number
One of the most obvious things you will need to do to sell your business is to come up with a number that you would actually consider taking in exchange for your company. In most cases, this number is a multiple of revenue or earnings, but there are many additional ways to value a business, so finding yours is essential.
7. Hire a Business Broker
Business brokers will manage the entire business sale process while you run your business like it’s not for sale. Everything about the selling process will be easier and less likely to run into legal issues when using an experienced business broker. Your broker will help ensure confidentiality during the sale process and pre-qualify buyers based on background and financial capability. Your sale team will also likely include an accountant, CPA and attorney.
8. Value Your Business
There are many certified business valuation experts in the industry that will charge several thousand dollars to let you know their opinion of your business’s value. A seasoned business broker will also offer a valuation opinion using a suite of valuation tools at no cost to ensure you can meet your financial goals on the sale ahead of listing.
9. Consider Different Deal Structures
Just as there are multiple ways to value a business, there are also different ways to structure a sale. Take some time to work through the potential options with your team of professionals before deciding on one particular deal structure.
10. Due Diligence Documents
Just like applying for a mortgage, there will be a due diligence process after a sales agreement is signed where the buyer will want to inspect your due diligence documents. Be prepared for this step in advance by having those documents ready to go.
If you are interested in selling your business, Crestone Business Group has the extensive experience you want on your side. Contact us today to set up a meeting, and let’s get together to decide what options might be available for your business.