Preparing your business and yourself for the transaction process can be tough. It will take a fair amount of work on your part, the right help and the right mindset. Knowing what’s ahead of you can also be a huge help, so this is part one of a series of three articles that will address the three biggest aspects of your business sale that you need to be ready for – hopefully long before you are in the thick of the transaction process. Potential issue #1? Time to prepare.

Time To Prepare

It probably goes without saying that the more prepared you are, the more likely you are to have a successful sale. In an ideal world, you would have a well thought out exit strategy from day one of owning your business, and you would just intuitively know when the best time to implement that exit strategy will be.

Unfortunately for many business sellers, life has a habit of getting in the way. Many business owners find themselves stuck in a position that forces them to sell, and sell suddenly. Perhaps a family member who lives out of state has a medical issue that warrants a sudden relocation. Perhaps the owner themselves has a personal or medical issue that requires more of their time and energy than the business can give. Whatever the reason, a sudden sale puts a large amount of pressure on a seller to accept a deal they would never have considered in better times. The added work necessary to get a business deal to the closing table also piles on a workload that a personal upheaval will make difficult.

How do you avoid this stress-laden catastrophe? Stay prepared. Most in the business transaction world would tell you that you should ideally give yourself at least a couple of years to prepare your business for sale before you list, so a proactive business owner can stay ahead of the game by preparing their business today in the event that they should suddenly need to sell. This proactive approach will alleviate a huge amount of stress when the time to sell does come, as well as set you and your business up for a successful sale.

Some things to prep:

Your taxes.

You taxes should always be up to date, your tax bills should be paid (including things like sales tax) and you should both know where your tax documentation is and be able to/already have good copies made. Poorly photocopied and incomplete tax returns are the norm in the business-for-sale world, and all this sloppy documentation does is reflect poorly on your abilities as an owner and poorly on your business in general.

A P&L

You should have a current Profit & Loss statement (P&L) ready to be printed off at any time, as throughout your listing you will need to provide your broker and any potential buyers with current numbers.

Your documentation.

Small business owners are famous for the box ‘o paper stuffed under the desk or in a back storeroom, but those records really need to be in an easy to read form. If you need help assembling all of your other business documentation, seek the help of a business broker or the assistance of a CPA who is familiar with business sales. Once your records (payroll, expenses and the like) are in a good format, all you need to do is add any future records. It will make your numbers easier to prove, and will go a long way in justifying your listing price to a curious buyer.

Your lease, contracts, etc.

You will need a decent copy of your lease and any contracts you have with vendors and suppliers, so know where this documentation is and have it ready to go. You should also look at your lease to see if there is a transfer clause that would allow a new owner to take the lease over for you in the event of a sale. If you need help figuring out what the lease should say, talk to your business broker.

Any preparation you do now will be less work you have to do later, so don’t wait for an impending sale to get your ducks in a row. Do yourself and your future stress level a favor and handle the prep work now.

Are you a business owner with little to no exit strategy to speak of? Do you have questions about what you can do to be ready, even if selling your business is 5, 10, 20 years down the road? Ask us! Please feel free to leave us a comment or question here, and we would be happy to help.

Want to read Part 2, Think Like A Buyer? Click here.

Want to read Part 3, Emotional Readiness? Click here.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com