You might think you are ready to sell your business, but very few small business owners actually are. Do you have all of your books in order? Have you made any necessary repairs?
Preparing a business for sale can be a lot like preparing a house for sale. You need to make it look aesthetically pleasing and fix what’s broken.
There is, however, one major difference. Due diligence.
Once you have accepted an offer from a buyer, the due diligence period begins and you will be opening up your financial records, contracts, leases – everything – for that buyer to inspect.
Any problems found during due diligence can lead to one of two outcomes. Either the deal is dead and the buyer walks away, or they come back to you with a lower offer to compensate for the problems they’ve found.
No seller wants a perfectly good deal to fall through, and you want to get the best possible price for the business you’ve worked so hard to build – so how do you avoid due diligence issues?
Do due diligence on yourself.
Before a buyer has a chance to peek behind the scenes and go over your books with a fine-tooth comb, you should do this yourself. By performing due diligence on yourself you will see your business through a buyer’s eyes and will be able to address any potential problems long before a buyer finds them.
Don’t think you have any issues that will come up in due diligence? Think again. All small businesses have a few skeletons in the closet, and they can’t be hidden. Buyers always find issues, so the best way to deal with this eventuality is to solve the problems before they are found.
How do you do due diligence on yourself? Ask your business broker for guidance and perhaps employ the services of a business transaction CPA. In most cases, you as a business owner know what the problems are. Figuring out the best way to deal with those problems will be where those experts come in handy. Is this an issue you can conceivable solve? How can you solve it? Is it a better tactic to just be upfront with the issues that exist when communicating with a future buyer or try to implement changes that will resolve those issues before the due diligence step in the process?
Performing the due diligence process on yourself will help you and your business to stay ahead of the game during the transaction process and will also help you get the biggest return on your business sale. Ask your business broker for help.
Do you have questions about what buyers will want to see during due diligence? Would you like to know what problems we’ve seen in due diligence in the past? Ask us! Leave any questions or comments and we would be happy to assist you.
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