Two realities every business owner must face are tax and exit. Yes, exit. You will have to exit eventually, whether on your own terms or by force. Whether or not you will have a happy exit depends on how you prepare your company and yourself for the eventual exit. According to the National Federation of Independent Business, only 30% – 40% of businesses listed for sale actually sell.
Preparing a business for sale requires careful planning and execution to ensure that it is attractive to potential buyers and that you can achieve a fair price for your hard work. Here is a step-by-step guide on how to prepare your business for sale:
- Start early:
Ideally, you should start preparing your business for sale at least 2-3 years in advance. This will give you enough time to make necessary changes and improve the business’s financial performance.
- Get a valuation:
Hire a professional appraiser or business broker to value your business. This will give you an idea of the fair market value and help you set a realistic asking price.
- Clean up financials:
Make sure your financial statements are accurate and up-to-date. Buyers will want to review your financials, so ensure that everything is organized and easily accessible.
- Maximize profits:
Focus on increasing your profits by reducing costs and increasing revenue. This will make your business more attractive to potential buyers and increase its value.
- Identify areas for improvement:
Evaluate your business operations, including marketing, sales, and customer service, to identify areas for improvement. Address any issues before putting your business on the market.
- Streamline operations:
Make sure your business is running smoothly and efficiently.Ideally Streamline processes and procedures to make it easier for a new owner to take over.
- Review contracts and agreements:
Review all contracts and agreements, including leases, employee contracts, and vendor agreements. Ensure that they are up-to-date and legally binding.
- Build a strong team:
Ensure that you have a strong team in place that can run the business without you. Buyers will be more attracted to a business that is not dependent on the owner.
- Develop a transition plan:
Develop a plan for how the business will transition to the new owner. This should include a timeline for the transition and any training or support that will be provided.
- Hire a professional:
Consider hiring a professional business broker or attorney to assist with the sale. They can help you navigate the process and ensure everything is done legally and correctly.