[Today’s guest post was written by Dave Gillian.]
You came up with the business plan, ordered the inventory, hired the employees, and launched your first-ever company. But now, it’s time to sell the business and move on to greener pastures. Just like a homeowner would fix broken windows, mow the lawn, and re-paint the front door before listing it for sale, small business owners have to make an honest assessment of company-related issues, and repair as many of them as possible before selling. The following tips can help entrepreneurs ready their small business for sale, and make it as risk-free and buyer-friendly as possible.
Decide What to Fix, and What to Leave As Is
Take an honest look at your company, and determine which areas need work. Areas that may require attention, Inc. says, include legal conditions, such as up-to-date licenses and no zoning issues; financial aspects, such as a positive cash flow and taxes that are paid in full; and business image issues, such as a good reputation, nice signs and a solid website.
After identifying weak areas, entrepreneurs should determine just how much they impact the overall success of the business, and if the price of improving it will be cost-effective. For example, if the website has not been updated in months and you reply, “So what is malware?” when asked if the site has any issues with viruses, you should start by making sure the website is virus-free and current. After taking care of whatever issues need to be fixed, it is also crucial that the asking price represent the fair market value of the business. As public accounting firm Dugan & Lopatka notes, buyers do not care about how much was spent to get the business ready to sell. They just want to see a fair price based on the amount of equipment, property and other assets. Overestimating how much the company is worth is a common problem when people go to sell their business, and can prevent a sale from taking place.
Get Your Paperwork in Order
Entrepreneur advises people who are ready to sell their company to make sure every single piece of paperwork is current, organized and up-to-date. In addition, what each worker is responsible for doing should be spelled out clearly. Always mention any performance indicators you want each employee or group of employees to achieve.
Prep work like may be time-consuming, but it will help reduce the overall risks involved with the company, and allow it to fetch a higher asking price. The reason this is so important, notes Biz Buy Sell, is that potential buyers will definitely do their research before purchasing a company, and good record keeping will help to establish trust and increase the chances the sale will happen. Good records will also help prove that the asking price is truly a fair amount.
Hire a Consultant Who Lives and Breathes Risk Control
Just as it can be hard to look at your house objectively and see the various elements that need fixing, the same can be true for entrepreneurs who want to sell their first business. After all, the company is your figurative baby, and seeing its flaws can be challenging. To help determine what needs attention, hire an internal control consultant, as SmallBusiness.Chron.com points out. These professionals spend their days finding the weak spots in a company and suggesting how to fix them. Because they are not connected with your business, internal control consultants can offer neutral and helpful suggestions on how to spruce up a company and get it ready to sell.
In addition, Biz Buy Sell says, be sure to hire a broker who has ample experience working with small business owners. Working with a well-qualified broker is key in getting an accurate estimate of the company’s worth, and can be one of the most important reasons a business will sell.
Dave Gillian is a PR-social media pro, whose clients range from software firms to consumer brands.