Selling Your Business? Things You Should Know!

Would you ever try to sell your house before fixing the worn out floorboards, sprucing up the landscaping and applying a fresh coat of paint? Nor should you approach selling your company without first making the proper preparations. The following simple steps can enhance the value of your company to maximize your return.

First, you need to clearly define your company’s position in the market. Develop laser-like focus on your business strategy and execution plan. As with selling a home, you should determine key attributes and estimate its true market value. You need to know how your Company is different and better than your competitors before selling it. Take time to understand the value proposition you bring to the table and how to best articulate your position in the market. Knowing exactly who you are and what you do will calm any anxiety about future viability and bring confidence to potential buyers as to what exactly they are purchasing.

If you have a strong vision and understanding of your company’s strategic goals, you can take steps to increase its value. Build a competent and robust management team to run like a well-oiled machine, to carry out the vision even after the sale. A sustainable platform that will continue to operate at its highest capacity after the departure of the owners is extremely attractive to potential buyers.

The next step is to organize and strengthen your records, and ensure all of your accounting and legal documents are in order. Just as sellers typically clean a house before a showing, you need to clean up your company’s records.

You are also creating the framework for a seamless transition. Begin this process by collecting old accounts receivable, removing obsolete inventory, eliminating all personal expenses and distributing out excess working capital. If possible, obtain an audit of your financial statements, and assess your tax returns and related state and local tax issues. Revisit articles of incorporation and bylaws, understand all consumer and supplier agreements and locate all patents and copyright documents.

Organizing this information will help you understand your value, and make the due diligence process easier on potential buyers and, as a result, on yourself. Streamlining the due diligence process will make the selling process move quickly and smoothly.

Next, take the time to assess your connections and how they might benefit you through the selling process. Solidify and memorialize key relationships. Invest in these relationships by signing employment agreements for key personnel, negotiate future contracts with key suppliers, expand your customer base beyond one or two, and resolve any legal and environmental issues. Having these strategic relationships established for the future will emphasize your Company’s long term sustainability.

Lastly, don’t forget about yourself in this process. Before selling your home, I’m sure you would have identified your next living space. In the case of a business that provided for all of your financial and professional needs, you will want to consider what your “life after” plan will be. How will you fill the void of the day-to-day grind you have grown accustomed to? Not to mention, what about all of your retirement goals and desires? Will the cash received from the sale be sufficient? These items should not be considered after you begin selling but quite the contrary. Perform a personal financial plan with a qualified estate and wealth manager. Obtain an analysis of the value of your business and talk to a tax advisor about the tax implications of the sale.

In any important transaction, a trusted advisor will always be necessary for certain legal and finance functions. When selling a home, both buyers and sellers seek the advice of realtors, and it is equally important to have an advisor or team of advisors who can guide you through your transaction. Find advisors that are a good fit for your needs, understand your industry well, and have been through this process before. Last but not least, communicate your expectations and desires early to ensure the whole process is as smooth as possible!