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You May be Ready to Sell—But is Your Business

Written by: Don Beezley

Article Overview: Selling your business requires planning and thought across a number of areas-if you want to maximize its value. This article address basic steps you should take to make sure your business is ready for presentation to buyers.

You May be Ready to Sell—But is Your Business

If you were selling your car, you’d probably vacuum the inside and wash and polish the outside in the hope of selling it faster, or getting a few hundred dollars more—or both. In a competitive business sales environment, and a world of ever more savvy buyers, it’s more important than ever that you put a little “polish” on your business when it’s time to sell.

Start by putting yourself in the shoes of a potential buyer and ask yourself, “What can I do to make this business more attractive?” You, the seller, are an important part in the overall marketing plan, and your role starts with cleaning up your business—both physically and financially. Remember, as a seller of a business, you are now a retailer in the “business for sale” market, and the buyer is your customer!!!

A good rule to keep in mind as you approach a sale is: Run your business operationally like you’re going to own it forever. Run it financially like you want to sell it.

Operational Management
Once you make a commitment to sale, you may experience a slight emotional letdown or lessening of your commitment to your business. Do not let this happen. If anything, shift your operational effort into overdrive. Improve your systems and document your procedures, re-train your employees, take extra special care of your customers, re-visit your advertising programs for effectiveness.

In short, do all the things you have always done to build a good business, and try to do it even better! Even a slight letdown can result in negative trends developing, including declining sales and employee turnover.

Financial Management
Many business owners enjoy the tax benefits that come from owning a small business. However, when it’s time to sell, it’s time to “clean up” your financial statements to make them as clean and transparent as possible. The fewer “discretionary” items you expense through your business (like travel expenses for that stockholders “meeting” in Hawaii, or all of your kids’ Christmas presents), the more transparent and believable your financial statements will be to a buyer and their banker.

Do not artificially remove core expenses from the business. If it is a business expense, it needs to be treated as a business expense

Listed below are a few other recommendations in several areas that will help you successfully market your business for sale, and help maximize its sale price:

Financial Records
A buyer has to understand the financial past, and future potential, of your company. This means you need to have up-to-date financial statements—income statement and balance sheet—on a monthly basis. They should clearly and accurately reflect the operations of the business. Try to minimize “extra” expenses, and be sure all of your revenue is reflected in your financial statements. Consider having a bookkeeping service prepare your financial statements—it increases the quality of your information, and the confidence buyers have in that information. BizByOwner’s Business Offering Package helps sellers organize their financial presentation for buyers in a professional manner.

Physical Appearance
First impressions count. Whether you run a high-end retail store or an equipment rental yard, your facility needs to be clean and organized. Get rid of excessive clutter and old inventory. Make sure any signs are professional (not hand written!). Touch up paint, replace old carpets, replace broken glass, and repair or replace broken fixtures. Remember to do all of this on the inside and the outside of your facility.

Remember, you’re trying to tap a buyer’s emotions with dreams of achieving their goals of owning and running their own business. A great bottom line can lose a lot of value if everything else doesn’t stack up. BizByOwner subscribers receive a Facility Inspection Report that helps them be objective when evaluating the clean up needs of the facility.

Operations
Evaluate your operations in light of the best way to run your business. Is there a point of sale system you always wanted but never purchased? Now might be the time if it will improve the ability to run the business and help your business appear up-to-date rather than over-the-hill. Be sure your employees are well trained and have clean uniforms, etc. Document some of your basic procedures in a manual—this creates a sense of comfort for a buyer by helping them believe they can successfully run their new business.

Price & Terms
Realistic value expectations and flexibility with regard to the terms you are willing to accept helps prepare you for assessing offers and negotiating with buyers. A business valuation is a critical part of the selling process. If possible, have a valuation performed when you are more than six months away from selling (Ideally, two to three years out), so you can begin to position your business for greater value when you do sell.

Conclusion
If you really want to sell your business like a pro and maximize your profit, be sure you focus on the subjective impression your business makes on a buyer with both the physical and financial presentation of your business.

Seek a value that is justified for the opportunity your business represents, but be realistic in your expectations, or you’ll be sitting on it a year from now without achieving your goal of a successful exit. Operate and promote your company in a way that will deliver a favorable lifestyle to a potential purchaser as well, rather than just profits. Try to view your business from the outside looking in—put yourself in the buyer’s shoes—and ask yourself: Is this a business I would want to buy? And make sure that it is.

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