Listing your business for sale is an experience that most business owners are not prepared for. Many small business owners like the experience of selling a business to that of selling a property. However, any experienced business broker can tell you otherwise. This article will address some of the key factors that suggest that a prudent move is to plan properly before listing your business.
Business performance must show improvement
If your business has stagnated and profitability has declined, a buyer may not be very interested in buying it. Put in the months (or years) it takes to showcase a thriving and growing company. If sales are declining, determine why. Maybe you need to refocus your sales efforts or add new products to your mix. If your margins are shrinking, look at all of your expenses to determine if there are any savings that can be realized.
Put your financial information in order
Spend the time and money necessary to have an accountant prepare financial statements. Don’t look at this exercise as an additional expense, but rather as an investment. When it comes time to sell your business, you’ll have better luck with buyers, and they’ll have more traction with the bank when they seek acquisition financing.
Documenting processes takes time
A business where success depends largely on one person has what is known as key person risk. These are businesses where the company will suffer if the key person leaves the company. These types of organizations sell at a discount, as a buyer may have difficulty transferring the company’s goodwill to himself after the sale. Try to eliminate this situation if it applies to your company. Document procedures and teach your customers that there are other people and resources in the business that they can turn to.
upgrade machinery
Keep track of all your equipment maintenance. Repair or replace broken or outdated equipment. If you wouldn’t be interested in buying it, ask yourself if a potential buyer would be.
Clear unsellable inventory
Check your inventory and do a full count to get an accurate amount. If you have inventory that is outdated, damaged, or unsellable, throw it away.
Tax and Legal Planning
Talk to your professionals for proper tax guidance before listing. The way you structure your business for sale can have a big impact on your net tax payable after the sale. Also work with your attorney. If you have any pending legal issues, such as lawsuits or employee disputes, try to resolve them before listing them.
These are just a few factors to consider before beginning the process of selling your business. There is certainly more, as every business is unique. Work with a business broker and other professionals to discuss things you can do right away that will help pave the way to a successful sale.
