It’s a decision that can open new doors and opportunities, but it can also be a drawn-out and complex process involving large amounts of planning, organizing, and executing.
To ensure you have everything you need, we’ve broken it down into key points for you to consider.
Financial Organization, Preparation, and Metrics
When preparing to sell your business, you must ensure all your financial documents are clear and organized.
This includes:
- Income statements
- Balance sheets
- Tax returns
- Cash flow statements
Clean and accurate financials are crucial for potential buyers. Consider minimizing non-essential or personal expenses throughout the business to ensure the records accurately represent the business’s performance.
Potential buyers will also want to see an analysis of how profitable the business is – this is where your metrics come into play. Demonstrate the business’s financial health by analyzing your revenue and profits.
In addition, consider getting your business valued to determine its market value – this is helpful to make your business attractive to buyers.
Optimal Business Structures and Processes
Streamlining your in-house operations and processes before selling your business will help with a smooth transition after the sale. The aim is to reduce the reliance on you as the business owner and ensure the company can still operate effectively.
An experienced management team is also a key asset in your business and something potential buyers look for as they help with employee transition and retention. They will also know the ins and outs of the business workings to help onboard the new owner.
Also, having a thought-out transition plan and process makes the sale easier. The employees in the business will want to understand how the deal affects them and what the future looks like.
Valuation and Potential Buyers
As mentioned above, having your business valued will give you a greater understanding of its worth and the areas of improvement to build on the existing value. Potential buyers have a few key factors they look for to determine whether it is the right business for them or not.
There are many ways to have your business evaluated. One method uses ‘Value Elements’ that include competition, growth, whether the company has a recurring revenue model, customer concentration, and whether a general manager exists. Each item has a point associated with it, and your business is rated against those points. This gives your business a percentage for different categories, providing you with areas for improvement.
Attracting potential buyers is another critical step to consider when selling your business. Creating marketing materials such as a sales package or prospectus that can be used when discussing the sale is advantageous. There are also platforms where you can list your business for sale that may provide extra marketing resources.
Final Steps for Sale
The final few steps to prepare to sell your business include:
- Having an exit strategy
- Signing a post-sale non-compete agreement
- Being emotionally prepared
- Having a plan for your life after the sale
Selling your business can be a multifaceted endeavor. While it can be bittersweet to bid farewell to a company you’ve built, it’s also an opportunity to embark on new adventures and live the life you want.
Read more about our advisory and valuation services and how we can support you during the sale process.
