Some things are OK to do last minute: planning a spontaneous vacation, buying that birthday gift for your mother-in-law or grabbing flowers on the way to a dinner party. Prepping your business for sale is not one of them.
According to a 2017 Exit Planning Institute study, 66 percent of business owners do not have a business transition plan in place. If you wait until you’ve decided you’re ready to sell your business to begin preparing, you’ve waited too long. Here are three things you can do today to prepare your business for future sale.
Part of being a successful business owner is expecting the unexpected. There are a multitude of situations that can arise and force you to sell your business at an inopportune time. This can include anything from personal issues like health and medical conditions to personnel issues like loss of key staff.
Ideally, you’ll sell your business when you determine the time is right, not when external factors leave you no other choice. That being said, it’s important to identify what would be the ideal circumstances for you to sell your business. A few questions you can ask yourself are:
One of the most important steps in selling your business is proving its value to potential buyers. The best way to do this is by providing accurate financial statements dating back at least three years. Some documents to have ready and in good standing are:
Use these documents now to identify expense control opportunities and areas to improve efficiencies over the next few years. Strong financials are key to positioning your business as an attractive acquisition.
Potential buyers are looking for businesses that are going to continue to operate efficiently and profitably after the predecessor has moved on. Reviewing and renewing contracts with suppliers and clients will ensure that these existing business relationships are retained. It’s important that these contracts are put in place over the usual course of business and not right before the sale so as not to raise questions or concerns.
Your employees should have confidence that you are going to choose a successor who shares and expands on your vision that originally made the company successful. Enlisting their feedback on important characteristics of future leadership will make employees feel valued. Having strong management teams in place will also help to alleviate any additional transitional burdens internally.
The Bottom Line
You’ve spent years dedicating your life and finances to make your business successful. Don’t sell yourself short by failing to adequately prepare your business for sale. Even if you don’t plan to sell in the near future, there are still steps you can take today including determining the ideal circumstances for selling, keeping record of and updating financials and putting contracts and agreements in place with suppliers, clients and employees. By doing this, you’ll be ready to sell your business on your own time.