For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course. But if you’re leaning toward selling, here are seven ways to prepare your business for sale:
1. Develop or Renew Your Business Plan
Identify the challenges and opportunities of your company and explain how and why it’s ready for a sale. Address what distinguishes your business from the competition, and include a viable strategy that speaks to sustainable growth.
2. Ensure You Have a Solid Management Team
You should have a management team in place that’s, essentially, a redundancy of you. Your leaders should have the vision and know-how to keep the company moving forward without disruption during and after a sale.
3. Upgrade Your Technology
Buyers will look much more favorably on a business with up-to-date, reliable and cost-effective IT systems. This may mean investing in upgrades that make your company a “plug and play” proposition for a new owner.
4. Estimate the True Value of Your Business
Obtaining a realistic, carefully calculated business appraisal. This will lessen the likelihood that you’ll leave money on the table. A professional valuator can calculate a defensible, marketable value estimate.
5. Optimize Balance Sheet Structure
Value can be added by removing non-operating assets that aren’t part of normal operations. You can also minimize inventory levels and evaluate the condition of capital equipment and debt-financing levels.
6. Minimize Tax Liability
Seek tax advice early in the sale process — before you make any major changes or investments. Recent tax law changes may significantly affect a business owner’s tax position.
7. Assemble All Applicable Paperwork
Gather and update all account statements and agreements. These include contracts, leases, insurance policies, customer/supplier lists and tax filings. Prospective buyers will request these documents as part of their due diligence.
Succession planning should play a role in every business owner’s long-term goals. Selling the business may be the simplest option, though there are many other ways to transition ownership. Please contact our firm for further ideas and information.
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