Usually people buy or start a business with the hope of selling it somewhere down the road for a profit. And you never know when that time will come. As mentioned, it comes down to planning and preparation before you make that hard decision.
I have outlined 7 absolute essential things you need to do to be prepared to sell your business.
I guess you will never fully be prepared but you can come close. You need to ask yourself: What will the end-buyer want to see? Below are the main areas to consider:
1. Paperwork: You have to understand that there is a good deal of paperwork the buyers will want to see, such as tax returns, profit and loss statements, balance sheets, inventory, and such. Do not under estimate the time required to put these things together, as well as making them look attractive to a buyers.
2. Clean up the Balance Sheet: The goal is to have your balance sheet make sense and be easy to follow. Pull your balance sheet periodically to see how it would read to a potential buyers.
3. Begin Capital and Minor Improvements to Interior/Exterior: I hate to say it but aesthetics matter. They play a role, perhaps not the key role, but a buyer consciously or unconsciously factors appearance into the equation. A bad appearance to a buyer may cause them to question if the owner really took care of other elements of the business.
4. Document “Add-Back” and Cash Items: The future buyer is going to want you to substantiate why the business maybe worth more than what the tax returns indicate. Be prepared.
5. Run the Business Efficiently: It sound rather rudimentary but you need to start eliminating excess expenses. It is one thing to say it to someone that certain expenses can be eliminated, but it is another to show them.
6. Review your lease: Plan ahead of time. If you lease the business space, don’t wait until the last minute to secure a strong, long-term lease. A bad lease can kill a deal.
7. Sit down with your “Team” Now: Sit down with your CPA, attorney, and business broker well ahead of the time you want to sell.