How To Prepare My Business For Sale
Before you sell your business, you need to ensure that both you and the company are ready for the sale. The reality is that a business should be prepared and ready for a sale roughly three years before it hits the market, and a transaction takes place.
Preparation is vital to attract potential buyers and streamline the selling process. A seller needs to plan for the time-consuming obstacles that come with selling a business like tax implications, employee stakes, any shareholding changes, and establishing the business’s overall direction.
Additionally, business owners can expect their business to spend anywhere from six to eighteen months in the market before the right offer is negotiated and accepted; due diligence is completed, and both parties sign the final purchase agreement.
The good news is that the professional Toronto business brokers at Beacon Advisors can help you organize all of these moving parts to ensure a seamless sales process. To prepare your business for sale, these are the ducks that you will need to get in a row:
Get Your Business Valuated
Get a business valuation to assess the market value of your business accurately. This assessment will help you identify your business’s most valuable areas and the best selling price for your business. Professionally valuing your business will also help you determine the type of buyers to whom you will want to market your business.
Identify The Type of Buyer For Your Business
What type of buyer are you marketing to — financial, individual, or strategic? The kind of buyer interested in your business will dictate where you market your business, how you sell it, and the aspects of your business you will want to capitalize on the most.
Ensure Independent Operation
To prepare your business for sale, you need to ensure that it can continue operating without involvement from an owner. Ensure that you train employees to handle operations and structure your business to continue running without your involvement.
Manage Working Capital
The reality is that many businesses struggle to collect receivables and, as a result, are forced to operate on a negative cash flow cycle. A negative cash flow cycle is bad for your business’s overall success and can deter buyers from investing in or acquiring your business.
Before selling your business, you want to make sure you manage your working capital. Your company needs to maintain steady revenue and hold the inventory it needs to generate positive cash flow. Businesses can renegotiate their credit terms and contracts with suppliers to manage working capital.
Tax & Real Estate Planning
Plan to meet all your tax and real estate obligations ahead of time, because income tax liabilities can dissuade prospective buyers. Generate tax concessions and establish good credit so that future buyers can reap the benefits. The good news is that you can get a professional’s help to ensure all your tax and real estate needs are satisfied ahead of putting your business up for sale.
Maintaining good financial standing is essential if you are looking to sell your business. Prospective business buyers will look at your business’s overall value, which, in addition to profits and returns on investment, includes outstanding expenses. When you have exorbitant fees that don’t contribute to your top line, it can be a red flag for potential buyers.
After all, when buyers evaluate your business to decide the best buying price, they will consider these factors. For this reason, it’s vital that business owners effectively manage their expenses, particularly in the years leading up to a sale. Beacon Advisors provides debt financing solutions to help businesses looking to manage their finances.
Ways you can effectively manage your expense leading up to a sale include:
- Regularly reviewing your expenses
- Reducing impulse spending
- Being strategic about your spending
- Thoughtful hiring & training processes
- Log receipts
Paperwork is easily one of the most tedious responsibilities of running, buying, and selling a business. For this reason, you’re going to want to organize all your paperwork way before you consider putting your company on the market. Organize paperwork surrounding your business earnings and expenses, and start documenting your processes ahead of your sale.
According to Inc, prospective buyers assessing your business will generally require at least three years’ worth of financial information.
Buyers will appreciate you mapping out your business’s workflow and processes to understand its daily operations and how they are facilitated. Before you sell your business, make sure you have detailed documentation of things like:
- Legal contracts
- Any other related paperwork
When you organize this paperwork ahead of time, it will be easier to market your businesses and to have buyers and professional advisors help you. Organized documentation will help streamline the overall sale and transaction process and improve your overall chances of successfully closing a transaction — and at a higher price.
Set Realistic Time Expectations
The average time it takes for a business with revenues over 1 million to sell is typically 12 months. When you are preparing your business for sale, have a realistic timeline in mind. Knowing that your business could be on the market for a while and that negotiations could take time can help you to better plan ahead.
Consider If You Should Delay
While sellers are often optimistic about future success and the ‘growth story,’ buyers need hard evidence of this growth before they agree to pay a premium for it. If your business had a bad year and expects sales to recover shortly, it is advisable to delay the sale until the business recovers. If the company signed significant contracts that will boost future revenue and EBITDA, waiting until the profits are realized can help increase valuation.
Enlist the Help of a Business Brokerage
The brokers at a business brokerage can help you prepare your business for sale; they can help you with all of the paperwork, market your business, and advocate for your best interest throughout the negotiation process. You may be the expert on your business, but business brokers are the experts on selling your business. At Beacon Advisors, we have experience selling businesses from a wide range of industries.
How Beacon Advisors Can Help You Prepare Your Business For Sale
Many brokerage firms focus purely on the transaction. At Beacon Advisors, however, we pride ourselves in taking the extra time to make sure you, the business owner, fully understand all of the options out there and help you choose the best path.
Our team of dedicated Business Broker specialists use our proprietary system not only to prepare your business for sale. We also help ensure that your business’s valuation, marketing, and positioning is fair and honest.
We work hard to ensure that the purchaser of your business will be the right fit. After all of your years of hard work and dedication, the last thing we know our clients would want to see is their business falling in the hands of a new owner.
Consider the ways that Beacon Advisors can help you prepare your business for sale.
Business Consulting: Beacon Advisors provides business consulting services to help business owners prepare their companies for selling. By investing in consulting, you can have peace of mind that you have not missed anything in the preparation process.
When you work with us, we can help you build a checklist of sorts to outline what you need to do before selling your business. We offer a wide range of buyer and seller advisory services both before and during transactions.
Business Valuations: Our professional valuators will perform a business valuation to assess your business’s value and ensure price it appropriately and leverage all of your assets.
Debt Financing Solutions: You may be looking to sell your business, but need to manage its finances before it is ready to sell. We provide a wide range of debt financing solutions to help companies maintain and grow their financing, whether they are looking to continue operating their company or preparing it for sale.
Global Marketing: How can you plan to sell your business when you don’t have a network to market to? At Beacon Advisors, we have a global network of trusted buyers to whom we market your business. Work with us to have peace of mind knowing that the right people will see your business.
Listings: We put your business listing on our site to reach a large volume of trusted, potential buyers.
Screening Buyers: If you are unsure about what to look for in a buyer, don’t fret. Beacon Advisors will screen all of your buyers to ensure we are only bringing people to the negotiating table who are reliable and worth your time.
Contact Beacon Advisors today to learn how we can help you prepare your business for sale and aid you through negotiations and the sales process.