Preparing Your Business FOR SALE

Dec 1, 2023Selling Businesses

Here is my best advice if you are thinking about selling – how do I know – I did it, I do it, and I continue to help people achieve their goal in the shortest amount of time with the least amount of pain!

Preparing Your Business For Sale

Here are some guidelines to help you prepare your business for sale. When the time comes to sell your business, you may want to find a business broker to assist you in the process.

1. Make yourself redundant

The buyer’s greatest fear is that you are the heart and soul of your business and that when you walk out the door, so will the business. In many cases this is true, because you have built the business around yourself; you have all the knowledge and skills to run the business, and you have great difficulty in delegating the various functions. What you have is not a business, but a very demanding job from which you can’t resign. No wonder you want to sell it! And if it appears like this to the buyer, why would he want to pay perfectly good money to rescue you from your plight?

2. Systematize your business

When you have all the various functions within your business systematized and thoroughly documented, delegation is no longer such a problem. Each person should have a clearly defined role, a chain of command, and a designated set of tasks and procedures which, when carried out competently, leads to measurable and desired outcomes. A buyer can then see himself fitting comfortably into this business.

3. Document your business

As well as documenting your procedures, it also helps to document your relationships with other parties in your marketplace:

  • With Suppliers. Your verbal or “Handshake Agreements” look very flimsy to a potential buyer of your business. Converting these into written agreements wherever possible will make your business confidence-inspiring, and at the same time, the very process of putting them into writing will enable you to cement these relationships even further, and perhaps even improve your lines of supply.
  • With Other Parties. Document your relationships with Industry Regulators, Trade Organizations, Quality Assurance, Therapeutic Goods Administration, Environmental Protection Agencies, Health Department, and a whole host of other parties who have some power or influence over your business. Document these relationships so that a buyer can not only see where your business stands within its industry but also feel confident that its existence is not under any undue threat.

4. Document your profit performance

We are all more or less tax driven, but the trap we set for ourselves is that it then becomes difficult to prove the true profitability of your business to a buyer.

The solution is to adopt transparent, legal, tax avoidance strategies that will enable you to minimize your tax burden, while retaining the ability to clearly demonstrate your true profitability to a buyer through “Add-Backs”.

  •  Document Capital Expenditure. Rather than expense capital improvements as Repairs and Maintenance, capitalize them. This will add value to your Balance Sheet and improve your demonstrable profit.
  • If you don’t fear tax, you can present a much better picture to your potential buyer, his Accountant and Bank Manager.

Before the buyer can purchase your business, you need to convince his Accountant, who will not approve the price, or even the purchase, unless the figures “stack up”. His Bank Manager will not be willing to lend the buyer the money he needs to meet your price without an attractive-looking set of figures.

5. Do your housekeeping

Just as with selling any other sort of property, first impressions count. There are several practical steps you can take to create a good first impression to a prospective purchaser. They may seem obvious, but then again, look around, you might be surprised.

Fear & Uncertainty The greatest obstacles to selling your business are fear and uncertainty, and until you can mitigate these in the mind of your purchaser, price does not even enter the picture.