Preparing to Sell Your Business

Whether your business is a thriving multi-million-dollar business or a small restaurant, buyers are always weary of what lurks in the shadows. This means you need to take a close look at your business as if you were a buyer. Preparing your business for sale is part of the client experience when you work with a First Choice Business Broker.

Preparing your business for sale will clear potential issues or questions BEFORE they arise which can take a year or more depending on your business type and size. It is never too soon to start the process of positioning your business by contacting a First Choice Business Broker. This process will provide you with the best opportunity to capture the highest possible sales price for your business. We have never met a business owner that regretted starting too soon!

On the other hand, if circumstances dictate that you have limited time or resources to optimize your business prior to sale, your First Choice Business Broker can help assess the value of the business in its current state or recommend “low hanging fruit” that requires low resources and yields modest improvements. Depending on your time and resources, here is an example of things you can do to prepare your business for sale.

Tips and First Steps

• Reflect on your true and honest motivation to sell your business.
• Avoid discussing your plan to sell the business with even your most trusted employees.
• De-personalize your business. This may mean removing your name from menu items such as “Mary’s Meat Loaf” or “Harry’s Hot Dogs”. When sellers are so involved with the business, a buyer’s concern is that business may go when the seller does.
• Remove items (clutter and junk) that are no longer needed or used in the business. (Buyers are impressed with clean and clutter-free businesses). We have seen that organized business tend to sell faster and for higher amounts than businesses that are disorganized or in disarray.
• The most important step - be honest about your business. Once a buyer discovers that something is not as you described, the buyer will worry about the possibility of other statements not being true and will move on to the next business.
• Contact your First Choice Business Broker to get a general idea of how much your business might be worth. It is important to align your expectations with the market as early as possible.
• Plan to be available to meet with buyers brought to you by your First Choice Business Broker and be prepared for difficult questions from qualified buyers. Buyer and Seller meetings tend to be more collaborative than typical real estate transactions where principals rarely meet and transactions can become confrontational.

Checklist Items

• Organize your financial records, as every buyer will want to review your profit and loss statements. Make certain these records are as up to date as possible. Be prepared with a copy of your property lease and any other financial documents, such as your inventory, accounts payable and accounts receivable.
• Make sure your books and records are clear and easy to understand. Buyers understand you seek write-offs each year but are they easy to see and understand?
• Is the ownership of your business clear? Are there silent partners or promises of ownership? If so, clean up the legal ownership of your business.
• Does your business have outdated agreements in place with customers or vendors? If so, now is a great time to ensure valid contracts are in place.
• Do you have a great staff but really haven’t clearly defined clear roles? Your First Choice Business Broker will use a simple employee questionnaire to help you gather and present this valuable information without breaking confidentiality.
• Have all the active owners decided what roles they will take in the training process of a buyer?
• Are your government accounts with taxation and department of employment up to date? Are you prepared for an audit if one is required?
• Do you have any lingering litigation issues? You may feel these issues are frivolous and/or not worth mentioning however buyers and their potential lenders will want to see these issues resolved.
• Is your licensing and corporation in good standing with your state and local officials? It is easy to check and remedy if needed.
• If you have created a business plan and just never had time, money or energy to implement the plan, a buyer may see value in that plan. Memorialize your plan and consider providing the plan in generalities to buyers upfront and in depth during due diligence. You might just see the plan pay off even if you are not the one implementing it.

Why is Now a Good Time to Think About Selling My Business?

With the retirement of the baby boomer generation, it is predicted that there will be a healthy number of businesses for sale in the next ten years. Understanding the market and the industry you’re in is vital to selling your business. Your business may be thriving and poised for even more substantial growth or you may be in trouble financially, fighting for business survival. Since 1994, First Choice Business Brokers has worked with a vast range of business types and owners selling their business for a variety of reasons.

It’s important to understand that buyers are often on the hunt for a variety of reasons. While one buyer might be attracted to your intellectual property, another buyer might be attracted to the location of the business. Yet another buyer may see your business as a great strategic purchase to fit in with their existing business. Buyer’s needs are often as unique as the individual businesses they are contemplating purchasing. Creating value for a buyer is something First Choice Business Brokers can help you do. Contact us to learn more.