“It’s time to get out!” you’re thinking. Get out of what? The feeling of being trapped in your small business after 22 hectic years as its proud but now exhausted owner-operator.
Ready to sell and move on? This is a major decision. In fact, this may be the largest financial transaction and the biggest personal transition you’ll ever make in your life. Don’t act impulsively. Instead, prepare well with careful thought and planning.
Preparing to sell a business is a complicated, demanding process that can take 8 to 12 months, even if you follow all the right steps to sell on your terms, on your timeline and without leaving money on the table.
Have you and your family talked about what comes next? Many of the would-be sellers who come into our office haven’t had this conversation.
Once you’ve gone through a valuation to assess your business’s worth and clarified your selling goals, you need to Prepare, Prepare, Prepare! This means 1) getting ready to go to market and 2) getting ready for your upcoming personal transition.
The process of preparing to sell your business should include both quick wins, and as many longer-term projects as you can fit into your timeline.
Whether you live in Toronto, in the GTA or elsewhere in Ontario, understand that preparing to sell a business is a project in itself, over and above your usual business-management duties.
Why prepare? To attract buyers, you need to uncover any problems in your business and reduce them. Buyers may view problems as risks that lower your business’s value. You also need to tidy up any “clutter”—ranging from a messy office, to broken equipment, to outstanding legal issues—that might fail to impress prospective buyers.
What's the best way to prepare? If you take our Transition Success Program, you'll get an in-depth understanding of everything you need to do to heighten your chances of a successful sale. But if we could leave you with a few tips for now, we recommend you start with quick wins and proceed with any tougher, longer-term fixes that you can realistically implement before the sale. See if you can tackle the following:
Are your books and records up to date? Are your records updated after you prepare your tax return? Do you file your taxes on time? Do you use modern software to keep track of sales, expenses, and inventory? Answer no to any of these questions and selling will be harder.
Interested buyers will ask for lots of information about your company. Be prepared to present any of your records—from your income statements, to your lease agreement, to your lists of fixtures and equipment—at a moment’s notice.
“Is my business financially solid?” The buyer and lender will need proof that it is. Be prepared to produce interim financial statements that show year-over-year performance.
Decrease discretionary spending before you sell, and look for easy ways to increase efficiency.
Are your facilities and equipment organized, well maintained, and modern? Old technology or a chaotic facility or office creates the impression that other aspects of your business may be similarly disorganized. Invest in equipment maintenance and upgrades as needed.
Count and assign value to your inventory. And remove old, damaged, or obsolete inventory because, in buyers’ eyes, it’s junk.
Pending litigation or other outstanding legal issues could make or break a possible buyer’s decision. Tidy up legal disputes before putting your business on the market.
Preparing yourself for the sale is often the most overlooked step, but failing to do this can drastically reduce transition success. Our Transition Success Program leaves you and your business fully prepared for your transition.
To protect your business from financial hardship, you shouldn’t allow any one customer to account for more than 5% to 10% of your revenue. The exact percentage depends on your industry. Diversify your customer base.
Can your business operate without you for more than a week or two? Too much owner dependence will make buyers skittish. Ensure your company’s success relies less on you and more on a capable management team that will stay after the sale.
If your business depends too much on its current team’s input, buyers might feel nervous. Document your systems and processes to ensure they’re repeatable and teachable.
“When you leave your business, preparing yourself is the piece that often gets neglected,” said Vincent Côté, Broker and CEO at Transitions Business Brokers. Selling your business and walking into your next stage of life carry enormous consequences, both emotionally and financially.
As you make your big decision, ask yourself these questions:
• “Is now right for me?” There’s no perfect time to sell your business. Think about your personal situation and whether it warrants an exit.
• “Will I have enough money?” Selling your business will bring a big shift in your cash flow. Get your finances reviewed, and redo your budget.
• “How can I deal with the stress of the sale process?” Preparing to sell a business is complex, time-consuming, and challenging. You may get an offer only to see the deal fall apart in due diligence. Brace yourself, treat the process as a special project, and be patient. And don’t go through it alone. Get a competent team of professionals on your side—for example, a lawyer, an accountant, a business broker, and a qualified exit planner.
• “What will I do every day after the sale?” As you let go, it’s normal to feel a sense of loss. Don’t let this feeling turn into regret about your decision.
At Transitions Business Brokerage, a Certified Exit Planning Advisor (CEPA) and seasoned business broker can help you create and implement the best possible exit strategy, prepare your business for sale, work out answers to the questions you need to ask yourself, and plan for the “business-sized hole” you’ll have in your life after the sale.
Step into your next chapter feeling prepared and confident! Engage the Transitions Specialists today.
