Preparing Your Business for Sale

These days I hear from many entrepreneurs and owners of family businesses who are thinking about selling their businesses. Some are selling due to health issues. Some have to sell as the owner has passed away. Many business owners tell me that they are thinking of selling because running that business is just not any fun anymore. Others are ready to retire and live the good life.One thing that is important to remember is when the economy is like it has been in the last several years, that is the time to buy, as there are deals out there, albeit the deals have issues with them. Conversely, if you think that you will get top dollar when you sell during this period, be prepared to be disappointed, as there are a lot of people looking for the deal of the century.Another thing to consider is every business for sale has to prepare itself for sale. Prior to placing your home on the market, you may paint the house, change the carpeting, remodel the kitchen, refresh the landscaping, to name a few items. Once those are done, then you would be contacting several brokers to interview them to determine a market plan and price to place on the home.In a similar fashion, there are items to take care of that take time prior to placing the business on the market. First, one of the things that you are selling is your depth of people who work for your company. If the buyer perceives that you are the one that they are “buying” in the purchase, you will receive less out of the purchase and you will probably be expected to work at the company for several years after the sale. If you do have management other than yourself, you may wish to prepare a multi-year employment contract for your key people so that they will still be with the company should it sell during that time frame.Second, you need to get your financial house in order. This means that if you need to sell off or shut down a division which is unprofitable and which is holding back earnings, that may be what you need to do in order to maximize your return from the sale of the entire company. This also means that you need to go over your financial reports with your accountant to clean up any issues that your accountants may have had with your financial statements. Collect those accounts receivable. Keep your financial ratios better than or at least in line with other businesses in your industry. Keep your financial house disciplined.Third, consider what assets to sell. For instance, if your business has real estate that is being used by your core business, consider having that asset in its own separate limited liability company and doing a separate lease at market rental value between the business and the LLC, which will provide you with returns for years to come. Retain your cash.Fourth, clean up and organize your physical plant. If the physical plant or offices are organized and clean, it will reflect well on a potential buyer. This should be part of your normal routine anyway, whether you sell your core business or not.As you can tell, most of the preparation work that you may do up front, prior to your placing the business with a broker or finding a buyer yourself, makes good business sense. Whether you sell or not, you need to run your business in a way that makes the business more profitable, efficient and competitive. Then, especially after this current market passes, you will be ready to find a buyer who will pay you what your business is really worth.

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