For business owners, one option to exiting involves selling. Often, this comes up when you’re considering retirement or someone has approached you and put an offer for the business on the table. If you’re considering selling your business at some point in the future, there are a few key things you can do now to prepare for a smooth sale.
- Organize Your Documentation: Your corporate records should be up-to-date and gathered. Your financial statements should be clear, and asset purchase records, employment records, invoices, and any other key documentation for your business should be up-to-date, organized, and easy to read. Once you get your documents organized, get in the habit of keeping good records.
Any other documentation that is an integral part of your business should also be organized. A little diligence keeping records on the front end results in low hassle and a quicker sale. For example, software companies who took the time to clearly document code as it was created find they pass their code audits to sell their software easily. A similar company that neglected to do this step often finds themselves losing the deal.
- Consider Your Assets: Depending on your industry, your business assets could be anything from service contracts to machinery to the talented individuals on your team. Identify and review these assets and determine if there is anything you can do to strengthen them. Consider extending the duration of your customer service contracts. Look at creating restrictive covenants for key employees, even if this entails providing them with additional consideration (i.e. bonuses, synthetic ownership, stock options). Create operating systems for production, finance, sales and marketing. Turn your business into an engine that produces without your daily supervision. This could include maintaining or updating equipment to investing in training or process improvement. These actions make the business more enticing to a buyer. A business with dated machinery that would need significant work is less valuable than one with an on-going cash flow and the processes in place for that cash flow to continue.
- Look at Your Timeframe: Much of the value of a business is in the expertise and connections of the owners, so an owner that is able to start the sales process before he is ill is able to facilitate the transition of knowledge and contacts. Many owners stay on initially to run the business, stay active on the board of directors, or switch to another active, advisory role. This can provide a huge advantage to the purchaser as the business continues to run smoothly during the transition and allows the owner to begin entering retirement.
If you think you might be interested in selling the business you’ve built, contact Virtus Law Firm at 612.888.1000 or email us at email@example.com. As experienced business owners ourselves, we can help you get your documentation in order and advise you all the way through the sale process. Virtus Law Firm worked on approximately 38 acquisitions in 2016 and 27 in 2015. We are very familiar with how to prepare your business for sale. When we help our clients plan to sell, we start early getting the business straight so when a purchaser is found, the business is ready for the transition.