You are ready to sell your business, ready to move on to the next stage in your life, but are you really ready to put your business on the market? Once an owner decides that it is time to sell, they frequently get a one-foot-out-the-door mentality, and the truth is without a good deal of prep work on your end, your business transaction will likely not end up like you hoped it would.
You need to (1) decide on a price, (2) get together what will be required during due diligence, and (3) ready the business itself for sale.
How does one decide on a price? The best answer here is to hire good help. As a business owner you may have a golden price floating around in your head, but the reality of the market is a business is only worth what someone is willing to pay for it. Hire a good business broker, someone who has experience in your market sector. Bring all of you financial records (like the past three years of tax returns, your P & L statements, etc.) and have an open-minded conversation about where you should price your business so that it will actually sell. If a broker will let you list your business for whatever you want, steer clear. An overpriced business will sit on the market indefinitely. If you don’t have your financial records in order (like they’re all wadded up in a stack of boxes in the back), then now is the time to get them straightened up for part two, getting your due diligence material in order.
What is due diligence and why do you need to be prepared for it? Due diligence is a period of predetermined time that occurs after an offer or letter of intent is given to the owner of the business. This time allows the potential buyer to take a good look at the business, like checking on inventory and combing over the books. You do not want to have to scramble, leaving your business unattended while you are trying to get the paperwork together. It will make you look unorganized to the buyer as well as potentially hurting the bottom line at a time when you are trying to get the most money from that bottom line. Say it takes you a week away from your normal business responsibilities to get what is needed for due diligence assembled, how much could the numbers falter in that time? If they do, then you can expect any potential buyer to want the price lowered accordingly. You can avoid this pitfall by simply being ready before you business is even listed. Having everything ready will also give an added benefit of less stress for you in a potentially stressful time. If you are unsure of how to get your books in order and assemble what you’ll need for due diligence, ask your business broker for help.
The third part of business sales prep is readying the actual business for sale. This can be as simple as a good thorough cleaning, or as complex as renovation work. Your business needs to be in good shape. The most common complaints from prospective buyers about businesses are easily fixed cosmetic concerns, like “the place is filthy” or “the kitchen doorknob fell off in my hand”. If you want to get top dollar for your business, you want buyers to see your business in the best light, so repair what needs fixing, give rough looking walls a fresh coat of paint, and get the place clean. That all-important first impression will mean more money in your pocket at the end.
Are you a business owner who has decided to put your business on the market, but you are unsure of what to do next? Leave us a comment or question, and we will be happy to assist you with getting your business ready to sell.