10 Tips When Preparing Your Business For Sale
Owning a business can be one of the most rewarding things you will do in life, but at some point, every entrepreneur needs to consider their exit strategy. The task of selling your business can look incredibly daunting, but in reality, with the help of a broker, it much more simple. There are many steps to selling a business that most owners are unaware of; some owners get deep into the process without knowing what they are doing and feel overwhelmed and buried. By seeking out an intermediary, you can continue running your business while they do the back work for you – then you reap the rewards. Whether or not you decide to sell now, these 10 tips can help you prepare for the sale of your business and ensure a more smooth experience.
- Hire an outside CPA to provide you with a monthly compilation of your profit and loss statement and balance sheet. This needs to be done in a timely manner each and every month, as no one will consider buying your business based on out-of-date financial information.
- Complete your company tax returns in a timely manner. Avoid extensions for filing, if at all possible. Your filed tax returns bring validation to your business’s annual results.
- Keep close track of “discretionary” expenses that are run through the business. These are expenses that are run through the business that may not be necessary to the business for a new owner but rather may add to the profitability of the company for him. You should keep receipts for these and be able to explain them to a potential buyer.
- See your CPA about the tax consequences of selling your business. There are many steps you can take to minimize the tax burden and an experienced CPA should know what they are.
- Be 100% committed to selling your business when you put it on the market! There are ups and downs in the process, so if you are not fully committed to the idea, it probably will not work.
- Record revenues and expenses as they occur and keep your books on the accrual method of accounting as this, in our opinion, reflect the true performance of your company. We believe this makes it easier to sell a business for the highest price possible.
- Keep your facility and equipment in a neat and orderly fashion. “Curb appeal” does play an important part in any buyer’s perception of your business and does affect the price you can obtain for it.
- Dispose of over-aged or un-salable inventory before you sell it. You typically will include an “average” amount of salable inventory in the price when you sell the business. This needs to be current and salable.
- Ensure that all of your equipment is in good working order when you convey it to a new owner.
- Hire a professional to represent you! A professional broker will give you leverage in negotiations; will find buyers and qualify them; protect confidentiality; and take it to closing for you. We will save you time and money.
Selling a business may not sound like a possibility for you, but it can be and it opens the door to many new opportunities. Even if you are too young to retire, selling your business might allow you to pursue an entirely different business venture. Many of our sellers also buy businesses through us and site the desire to try something new as their reason for selling. Whether or not you are ready to sell, it is important for owners to be prepared and have the resources they need to make that move on their terms.