Listing your business for sale is an experience that most business owners are unprepared for. Too many small business owners liken the experience of selling a business to that of selling a piece of property. Any experienced business broker can tell you differently though. This article will touch on some of the key factors that suggest a prudent move is to properly plan before you list your business for sale.
Business Performance Needs to Show Improvement
If your business has been stagnating and the profitability declining then a buyer may not be very interested in purchasing it. Spend the months (or years) it takes to show a prosperous and growing company. If sales are on the decline determine why. Perhaps you must refocus your sales efforts or add new products to your mix. If your margins are retreating then examine all of your expenses to determine if there are any savings that can be realized.
Get Your Financial Information in Order
Spend the time and money it takes to have accountant prepared financial statements. Do not look at this exercise as an added expense but, rather, an investment. When it comes time to sell your business then you will have better luck with the buyers and they will have greater traction with the bank when they go for the acquisition financing.
Documenting Processes Takes Time
A business where the success is dependent largely on one person has what is referred to as key person risk. These are businesses where the enterprise will suffer if the key person walks away from the company. These types of organizations sell at a discount since a buyer may have challenges to transferring the company goodwill to themselves after the sale. Try to eliminate this situation if it applies to your company. Document procedures and train your customers that there are other people and resources in the business that they can turn to.
Get Machinery Up to Date
Keep track of all of your equipment maintenance. Repair or replace broken or obsolete equipment. If you would not be interested in buying it ask yourself if a prospective purchaser would?
Clean Out Unsalable Inventory
Go through your inventory and so a thorough count to get an accurate amount. If you have obsolete or inventory that is damaged or unsalable then dispose of it.
Tax and Legal Planning
Talk to your professionals to get proper tax guidance before you list. The way you structure your business for sale may have a large impact on your net tax payable after the sale. Also work with your attorney. If you have any legal issues pending such as lawsuits or employee disputes then try to have them resolved before you list.
These are but a few factors to consider before you actually start the process of selling your company. There are certainly more, as every business is unique. Work with a business broker and other professionals to talk about the things you can do immediately that will help pave the way to a successful sale.