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How To Prepare Your Small Business For A Profitable Sale?

May 08, 2016

A:

When you started your own business, you probably didn’t give much consideration to selling it. However, with statistics showing that 80% of a small business owner’s net worth is tied up in their company, preparing your business for a profitable sale should be on your radar.

Whether you plan to sell your business outright or transfer to partners or family members, here are some steps you should take to protect your assets:

Know what your business is worth. Getting a professional valuation of your business is key to a profitable sale. Be sure that whoever values your business has expertise valuing businesses in your industry.

Build your business as an investment . The eventual buyer for your business is looking for a good investment, one that will continue to pay long after you are gone. Build your business as an investment by having a diversified management team that has some skin in the game, so they will stay on after the sale. Having a business that provides recurring revenue is also more attractive to buyers, so be sure your growth strategies are built on a solid foundation.

Have written plans, systems and processes. If your business plan exists only in your head, this is a sign to buyers to beware. Be sure your plans, systems and processes are well documented so that new ownership can step in and run the business seamlessly.

Organize your business’ organizational and financial documents.  Having well-organized documents such as annual and monthly profit-loss statements, tax returns, inventory list, list of customers/clients, etc. can help you prove up or even boost the actual value of the business, attract the strongest buyer, and ensure a smooth and successful business sale.  When buyers are confident in the strength and vitality of a business, they are more confident and more willing to offer a higher purchase price.

Take taxes into consideration. When determining the best time to sell your business, take taxes into consideration. Funding a retirement plan for employees and other tax saving strategies should be employed to shelter assets from taxation.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™(legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $750, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

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