{"id":2819,"date":"2019-09-23T13:49:52","date_gmt":"2019-09-23T13:49:52","guid":{"rendered":"https:\/\/channelislandbusinessbrokers.com\/?p=2819"},"modified":"2020-12-28T09:26:22","modified_gmt":"2020-12-28T09:26:22","slug":"preparing-your-business-for-sale","status":"publish","type":"post","link":"https:\/\/channelislandbusinessbrokers.com\/preparing-your-business-for-sale\/","title":{"rendered":"How to Begin Preparing Your Business For Sale"},"content":{"rendered":"\t\t
Selling your business is a once-in-a-lifetime event (for most, at least).<\/p>
Given the significance of this event and its lasting impact, it\u2019s alarming how little\u00a0\u00a0 time and effort many business owners spend on preparing the business for sale.\u00a0 Yes, buyers will want to know a lot about the business\u2019 financial health with a focus on improvements that should be a top priority. But there are other factors and attributes that should be \u2018polished\u2019 up as well to obtain maximum value from your sale.<\/p>
We know it can be hard to focus on these things when you\u2019re also trying to keep the business running, all while maintaining confidentiality. This whitepaper will introduce you to the initia<\/u>l areas you should evaluate when preparing your business for sale, giving you a roadmap to get started. It is NOT an exhaustive list \u2013 it is a getting-started list. And your Channel Island Business Broker will be there to guide you through this process, serving as a confidant and liaison along the way.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Let\u2019s start with everyone\u2019s least favorite topics!<\/p> Your goal is to eliminate, or at least minimize, red flags associated with your business. Buyers will be immediately scared off if it\u2019s apparent that the house just isn\u2019t in order. Follow this checklist to see which areas are good, and which need your attention..<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t After addressing\/correcting those that you can, the next step is outlining a strategy for how to present any remaining factors to potential buyers. Issues should be fully disclosed, but there may be opportunities to show buyers how corrective strategies or other resolution solutions have been deployed. For example, if you do have liens that cannot be paid off in advance, outline how they will be paid off through escrow at closing.<\/em><\/p> \u00a0<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t The stronger the business\u2019 bottom line, the more you can ask for it. There are really only two ways to improve the bottom line of a business in the short run<\/u>: raise prices or cut expenses (or, do both).<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t If you\u2019ve been on a regular schedule of executing price increases, then stick with it. If you\u2019re seeing growing revenues over the past couple of years yet diminishing profits, your price increases may not be substantial enough and\/or your expenses need evaluation. So analyze if your next price increase should be targeted to a higher rate than what was done previously. A savvy buyer can spot a price hike as a hollow scheme to improve the bottom line, so be ready to explain the logic behind your approach.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Businesses that have more time to implement initiatives and show results should also see where top-line improvements can be made by focusing on sales and marketing. It\u2019s always best to show increasing or consistent sales when selling. Sellers nearing retirement age, or those who are burnt out in the business, often start to take the \u2018foot off the gas,\u2019 leading to declines in revenues, focus, and energy. When selling is on the horizon, it\u2019s time to put the \u2018pedal to the metal.\u2019<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t Your perceived value of a gift is always heightened if it\u2019s well wrapped and decorated. The same holds true for your business. Perception is <\/em>reality, so be sure the perception of your business adds to its value, not detracts from it. Looks do matter (in business sales, anyways).<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t When evaluating the impression your business makes, consider the following:<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t This is the time for spring cleaning, regardless of the actual season. Interior and exterior portions of the business should be clean and polished, and anything with your logo on it should be current and sharp. Assume that once a serious buyer signs an NDA and knows the identity of your company, they will begin evaluating how it\u2019s represented in the market.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t Besides just being fun to think about, outlining specifically what you want your next phase of life to look like is actually very important for selling your business. Do you want to remain where you are located, or start traveling? Are you willing to stay involved with the business for a period of time, or do you want an immediate exit? How much time might you be willing to dedicate if you\u2019re staying involved, for how long, and doing what activities? What level and type of compensation would you seek? Would you be ok with someone else now having final decision-making authority?<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t Many businesses need the current owner to stay around for at least a little bit, to facilitate the transition. For some sizes and types of businesses, that timeframe could be extended to a couple of years. Complex businesses that are heavily relationship-dependent fall into this category, as well as those businesses that are more speculative in nature. Typically, Independent Contractor Agreements, Non-Compete Agreements and Earnouts are part of these scenarios, and they must be considered as part of the overall deal structuring.<\/p> \u00a0<\/em><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\tPreparing Your Business For Sale<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Step 1:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Legal & Tax Housekeeping<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Step 2:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Boost the Bottom Line<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Step 3:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Put A Bow On It<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Step 4:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
What Will You Do Next?<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Conclusion<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t