If you want to get the best price for your business, you should allow for adequate preparation time.
Tying up all the loose ends
You’ll want all the operational and financial details to be in top shape, but it may not be necessary to take on any major capital projects to correct all of your business’s flaws. Buyers want to see profits, not debt, and they might have the resources to correct flaws on their own after they’ve taken over.
Your checklist should include the following elements:
- All company financials are ready to be audited.
- Audits and other records are ready for inspection by prospective buyers.
- All taxes are paid.
- If you have long-term debt on your books, try to resolve these issues – or write them off.
- Verbal contracts with vendors and key employees are put in writing (non-compete or “retention” agreements for employees are key in some fields).
- Leases and other contracts that are due to expire have been renegotiated (unless the buyer has requested that you hold off). You should ensure that all contracts will be honored, no matter who owns the business.
- You’ve developed a selling memorandum that details the business’s financials, its assets, and its potential. This memorandum summarizes what you are offering to prospective buyers.
Make sure your financial statements are easy to follow
You should make sure your financials are easy for the buyer to follow. If they’re not, restructure them. To potential buyers, cash flow is king. Your cash flow figures should be absolutely clear. Do what you can to cut personal expenses and nonessential expenditures.
But don’t change your accounting practices just to make the business look more attractive. Professionals are trained to spot such actions, which can seriously derail your transition plans.
Sell off assets and inventory that aren’t generating revenue
Want to make your business more attractive? Get rid of the dead weight of out-of-date inventory and other assets – including outdated equipment – that aren’t generating revenue. It also can’t hurt to spruce things up cosmetically. All physical aspects of your business should be “immaculate” – and in good working order.