Why you need to prepare your business for a sale now
Even if it’s not time to sell your business, preparing your business for a sale reduces liability and helps ensure your financial health. Read our key reasons for getting ahead of the curve.
Published 11/3/24
If you’re thinking about selling your business in the next two to three years, it’s crucial to start preparing now. Whether your goal is to retire, start a new venture, or simply step away, a successful exit doesn’t happen overnight. Proper preparation can significantly improve your chances of selling at the right price, to the right buyer, and under the best possible terms.
In this article, we’ll explore the key reasons why early planning is essential and what steps you should take to prepare your business for a sale.
Addressing the business’s financial health and relationships
Determining your business’s health and addressing issues to maximize your business’s value takes time and work. Buyers will also need proof of your business’s value. By giving yourself time, you can focus on improving key areas such as:
Proof of Financial Health
You will need to prepare financial documents that present your business’s health to a prospective buyer. An accountant can help you collect the necessary documentation and give you a snapshot of where you stand.
Operational efficiency
The process of gathering together financial data is an opportunity to streamline operations, reduce unnecessary expenses, and make sure your team is well-trained ahead of a transition. It will take time to identify what the business loses with your absence and what must be done to train partners and employees to compensate for it. Ultimately, a business that runs smoothly without your oversight is far more attractive to potential buyers.
Diversify revenue streams
Buyers appreciate businesses that aren’t overly reliant on a single product, service, or customer. With enough time you can find new ways to diversify your offerings and client base, building value.
Make improvements to marketability
There are a number of specific ways to make your business more attractive by way of marketing a wider pool of buyers that you will want to take time to address. Some ways to boost your business’s appeal include:
- Brand and online presence: Consider updates or enhancements to your brand and online presence. Review your website, social media channels, and customer reviews so that they reflect a strong and reputable brand.
- Improve customer relationships and testimonials: One way to impress a buyer is to present the value of your goods or services through the words of your customers. Improving the relationships with your customers and gathering testimonials will all contribute to a buyer’s confidence.
- Upgrade sales and marketing materials: Look through sales brochures, presentations, pitch decks, and other materials and update them. View them from the perspective of a buyer or investor and make sure they showcase the full value of business.
Find out what you’re worth.
Provide enough time to resolve legal and tax liabilities
Your business may have outstanding legal and tax concerns that could complicate or delay a sale. Work to address these as much as possible before listing your business. Potential buyers will conduct their own thorough due diligence on legal issues, so be prepared to openly disclose the issues to buyers and work out a plan with an attorney for how to handle unresolved issues through indemnification. Some important areas to focus on in regard to liabilities include:
- Contracts and agreements: Review contracts with suppliers, customers, and employees to ensure they’re up to date and legally sound. Buyers will want to see well-documented agreements that can be easily transferred.
- Intellectual property: Protect your intellectual property, such as trademarks, patents, or proprietary software, to avoid disputes down the line. Legal protections can also add value to your business.
- Tax optimization: Work with a tax advisor to ensure you’re structured in a tax-efficient way for both the sale and your personal financial situation after the sale.
- Other regulatory requirements: Your business may be required to undertake environmental inspections or other audits before a sale, depending on your industry. Work with a lawyer to make necessary preparations.
Work ahead of time to find a buyer
If you haven’t already found one, finding the right buyer for your business – one who has the necessary financing, enthusiasm for the industry, and the necessary qualifications to ensure a smooth transition – will take time. If you can’t find a buyer ahead of listing your business, keep in mind that they will have their own pre-sale due diligence process which can take time. This is where all of the preparedness above can go a long way to streamline the negotiation to closing the sale.
There is no need to go it alone
No matter where you are with preparing for a sale, we can help you get the information and assistance you need to get your sale to the finish line by providing:
Get in touch with us for a free consultation with a Bridge advisor and learn more about your business’s potential.
Talk to one of our business advisors to learn which strategy is best for you.
We can’t wait to work with you.
