While it’s important to understand that selling your business is a serious undertaking and will require a lot of work, it doesn’t have to be a stressful headache. If you are not well prepared sling can be very stressful. What’s more, you’ll get less money for your business than you would have if you’d prepared ahead of time. On the other hand if done properly you can not only sell your business faster and for more money, but also you will have less stress throughout the process. Here is a 3 step process we have identified that helps you accomplish just that.
This will be the shortest section in this article, but it’s one of the most important as well.
Step 1: Make sure you’re ready emotionally
Before you can hope to sell your business for what it’s worth, you need to be sure you’re actually comfortable with the idea of leaving it behind in the first place. Once you sell your business, it becomes someone else’s focus and a huge part of your life will change.
Are you prepared for that, emotionally? Do you already have definite plans in place to fill that time? Do you have new goals in mind that you’ll be working toward after the sale?
If not, take some time to seriously consider the answers to those questions and make sure that selling is truly what you want and need to do at this point. If you decide it’s not, that’s fine: there are plenty of other things you can do to change and improve your business as opposed to letting it go before you’re ready.
Step 2: Clean up behind the scenesFor prospective buyers looking at your business through emotionless eyes, it all comes down to numbers.
That’s why it’s vital for your business records, financial records, legal paperwork, and all other quantifiable details to be in order. They need to paint a positive picture of your company’s success that’s easy for newcomers to understand and appreciate. And, importantly, they need to see that success continuing after you leave.
Here are some important actions you can take now to accomplish this:
- Review the records – Work with your real estate agent, accountant, and lawyer to make sure all your tax records, payroll records, corporate documents, and real estate records are up-to-date, complete, and organized so that someone who’s never opened your file cabinet will have no problem getting at what they need.
- Review current agreements – Confirm that all current agreements involving your company are up-to-date and properly documented: leases, supplier agreements, vendor agreements, employee contracts, and every financial obligation the company is responsible for.
- Create realistic valuations and projections – With the help of your accountant and business broker, use all these historical and current records to develop realistic projections of the company’s growth and financial health over at least the next 1-3 years, as well as a firm valuation for the business that takes these projections into account.
These activities could be a quick fix for ultra-conscientious business owners who have always maintained flawless records they can instantly put their hands on. But, if you’re like the other 99.9% of business owners, it could take a while.
Step 3: Clean up what buyers will see firstOnce your records and all the other behind-the-scenes details are spruced up and in place, it’s time to work on preparing the business for sale i.e. creating a nice “curbside appeal.”
Although it’s the financial health of the business that will seal the deal for a prospective buyer, there’s very little chance a buyer will get far enough into the situation to look at those records if their first impression of the business is a negative one. That’s why the old real estate concept of “curbside appeal” is such an important part of selling your business effectively.
For example, consider a neighborhood Laundromat for sale.
If you were a buyer interested in potentially buying a Laundromat and you heard one was for sale, you’d likely take the time to drive by or stop in to see it for yourself before even contacting the owner. Now, imagine if these are the first things you see:
- The parking lot is dirty and in need of resealing.
- The entrance is cluttered and dirty, with a crack in the glass door.
- The sign on the front window is faded and peeling and operating hours are illegible.
- Three of the 12 machines inside are currently out of order.
- The detergent vending machine is out of stock of two different brands.
- The tile floor is cracked in places and in need of cleaning.
- The drop ceiling has numerous stains from roof leaks, one of which appears to be ongoing.
And all of that became apparent within three minutes of pulling up to the location and walking inside. What are the chances you’re going to run home to start your due diligence and put in an offer on this business?
Probably zero. Or, you’ll put in the lowest of bids, assuming the current owner couldn’t care less about the business and just wants out.