Now that you’ve run your business for a few years successfully and are ready to move on, you might decide to sell your business. But to do that, there is an extensive list of plans and tasks that you must undertake to prepare it so that the buyer is ready to meet your asking price.
The best business brokers walk their clients through the process to ensure that the sale goes smoothly, and the owner gets the best possible amount from the deal.
You may be an expert at selling in your industry, but selling a business is another ball-game altogether. That is why it is always advisable to hire an experienced business broker to assist you in getting the most amount for your company.
Irrespective of whether you wish to employ a business broker, or you want to sell your business yourself. Here is a pre-planning checklist that will help you prepare your business. So that it can fetch you the price you have in mind.
The Financial Records and Books
Having the right documents is not enough. You must be able to present the records in a manner that is not only accurate and professional. But reflects the business in the best possible way.
Potential buyers would be interested in taking a closer look at the particular financial details, such as the profits and balance sheets.
They would also want to understand how the business accounts would look like when they own the business. Such as the cash flow, details of general and company expenses, legal fees, so on and so forth.
Buyers usually go through the financial details of the last three years to check for consistency, including the details of the year to date.
You can hire an accountant or a financial advisor who can review your books and advise you to present them ideally. They will be able to spot out if something seems out of the ordinary so that you can be ready with explanations for them.
The advisor can help you plan out the financial future after you get the money. While you are at it, you can also consult a tax advisor who can help you with the post-sale tax implications.
Your buyer might enquire about your due diligence at some point during the negotiation process. They might want to review the legal documents of the business and ensure that they are up to date. These can include the following.
- The original incorporation documents.
- Employee and contractor agreements.
- Suppliers and vendors contracts.
- Documentation of your lease.
- Licenses and insurances.
Even if you own a small business, these documentations can be thousands of pages and take a significant amount of time to compile.
That is why it is advisable to hire a business broker to assist you with the compilation and presentation of the paperwork.
Conducting a professional business valuation is necessary to estimate the right price that you should ask for your business. There are many ways of doing it, but the most common methods are to hire a financial advisor or a business broker.
Professionals consider many factors related to your business to perform the business valuation. Such as business financials, market position, physical location, inventories, and many others.
But keep in mind that your asking price should not only depend on the valuation of the business. You must also consider the buyer since some of them might be willing to pay a premium price depending on the reason they wish to purchase your business.
Secrecy of the Sale
Ensure that your plans to sell the business are kept as private as possible. Any information about the company should be passed on after the business broker or potential buyer signs a non-disclosure agreement.
You would want to keep the information from your staff as well and disclose any information only when they need to be consulted after making considerable progress in the sale process.
If word gets out about your plans prematurely, it can contribute to the devaluation of your business and cause the price to drop below your expectations.
Even though the tasks for making a sale can seem monumental, don’t let that deter you from losing focus on your business. Any fall in the performance of the firm before the deal gets finalized can cause the price to fall.
That’s why it is essential to keep the level of attention constant on your business and ensure that the operations get carried out smoothly while maintaining profitability. Remember that the money you get from the sale can transform your life, and is worthy of the extra effort.