Taking the time to properly prepare your business for sale is a must for a successful result. So let’s assume you’ve followed all of my excellent preparation advice. You’ve started planning for your sale well in advance and you have compiled high quality financial reports. Here are a few more things to take under consideration:
Do your Tax Homework
Meet with your advisors and understand the tax consequences of a buyer purchasing assets since the vast majority of transactions are asset purchases rather than purchases of stock. Research any changes you can make that will enhance your after tax return of a transaction. In some cases there are advantages to making such changes well in advance of a business sale.
Clean up Legal Documentation
Not all owners are diligent about maintaining the legal background documentation of their businesses. Often formal corporate governance requirements such as filings, board of directors meetings, and shareholder approvals are lacking. It is not always easy to find contracts, leases and other important documents.
When preparing to sell, have an attorney experienced in business sales review your legal records as if they were doing due diligence for a buyer. This will give you time to remedy any deficiencies before you bring the company to market.
Document your Processes and Procedures
The way you conduct business is your secret to success. If that information is locked in your head or your people’s, it represents a risk for the buyer. What will they do if you or some of your people leave after they buy the business? Creating written process and procedure institutionalizes this information, reducing buyer risk and increasing the value of the business being sold.
Reduce Dependence on the Owner
The more your business success depends upon your personal work and contribution, the more risk buyers perceive. After all, if they give you enough money so you don’t have to work, are you going to be motivated as you were before? Owners who want to posture their business for sale should be working to replace what they do by developing others in the business.
Anything I’ve left out? Let me know in the comments.