Planning for the sale of a business can seem very overwhelming.
Will you be able to retire with enough cash to live off of? Will your employees be taken care of?
These questions are bound to make your head spin.
However, by starting the process early, learning how to prepare your business to sell doesn’t have to be so difficult.
If you plan on selling your company within the next three to five years, you can get a head start now by following these steps:
1. Providing strong financial statements
Buyers want to know the financial health of your company. Providing strong financial statements that present a clear and accurate picture will make your business more sellable.
Be sure to maintain complete and detailed financial books with all income recorded for at least three years before a sale. You will need an accurate depiction of your EBITDA.
Offering reviewed financial statements from an independent CPA firm or audited statements will go a long way in providing confidence to a prospective buyer.
2. Increasing your revenue
Sales revenues are typically the first figures a prospective buyer wants to see when they are evaluating the value of your company. If your company’s revenues are lagging, here are two ways to increase its value and impress buyers:
Create recurring revenue
Buyers perceive recurring revenue as gold mines. There are lots of ways to create this, including maintenance contracts, auto-renewal subscriptions, and consumable products. Select one that best suits your business.
If you’re unable to create recurring revenue, you can create a list of long-term customers and their yearly revenues. This can impress buyers by showing consistency and customer loyalty.
Stress to your sales team that their goal should be to increase sales this year. Bring on additional people to achieve this goal if you need to. Your team should have a clear picture of how they can help increase profits. Continuously review the progress of your staff and make changes where necessary.
3. Defining your processes
The perfect asset any potential buyer would want to own is one where even without the owner, everything runs smoothly.
You can impress any buyer by simply documenting your repeatable company processes and policies. Create a database that can be searched with ease by prospects.
Develop and empower your management team to maintain customers, employees, and vendors without you. Demonstrate how your business can flourish on its own. It’s important that your potential investors can see that the business won’t collapse once you depart.
4. Formulating a plan to keep key employees
No one wants to deal with employee turnover.
New owners will look for solid stable management that sticks with their companies long-term. However, fear of a sale could affect current employees’ job security. They will have a different outlook when it comes to a potential new owner and boss.
Your best bet against losing key employees when trying to sell your business is to be sure that they are sufficiently compensated prior to and during the sale.
Having trained employees ready and available to continue work will also be an attractive asset to potential buyers. However, once you’ve identified the right buyer, you should have a discussion before adding new compensation. Formulate a plan to keep these employees, and incorporate the new buyer in said plan.
The best way to prepare your business to sell is by hiring a business intermediary like National Business Search. NBS will alleviate the stress of preparing your company for sale while getting you top dollar. We’ve helped hundreds of business owners sell, merge, and buy businesses. To learn more about how we can help, call us at (727) 363-6992 or fill out our contact form to book an appointment.