How to Prepare a Business for Sale

Many business owners fail to realize how much they can do to make a positive impact on the sale price of their business.Many business owners, especially those with a tight timeframe, assume there isn’t much they can do that would have a significant impact on the sale of their business, but that’s really not correct.There are long-term actions you can take but some short-term ones as well. Part of it depends not on how much time or money you have, but also on your will, your commitment to do so.Some business owners are burnt out and frustrated and want out fast. Selling your business can be done in a fast dash fashion, or it can be a longer marathon, taking two to three to four years to get ready to go.This depends on your motivations, the timeframe for selling and the receptivity of the marketplace.When you’re looking to harvest a life’s work, rushing is not advised. But the real world or your strong desire to leave may fuel a fast exit. You can, however, still take actions that will benefit you and the sales process.Now that being said, beware of shortcuts. Some advisors have recommended immediately cutting off research and development costs, for example, or laying off people in an attempt to improve cash flow as quickly as possible.But these ploys can be transparent and sophisticated buyers will see through them.Your guiding principle should be: what’s bad for business is bad for the valuation of the business and therefore the sale.When preparing your firm for sale, it’s all about return on investment. It’s like any other investment but this is the investment of a lifetime.You need to weigh it in terms of money, energy and time. Evaluate each project that you’re going to take on for the likelihood of providing a high and fast return and of positioning you to act quickly if a buyer appears immediately.Once you’ve decided to sell, create a plan to make your business more valuable, more rewarding and also less risky, to make it more attractive as the buyer will see it.This could involve one or two large projects, but it most likely will be a group or maybe portfolio, let’s say, of smaller prioritized ones. A series of sprints you can execute as the sales time horizon permits.Your goal is to situate your business to attract the largest number of potential buyers in the shortest amount of time and at the highest price.Shaping your action plan forces you to change your personal perspective a bit. By thinking about preparing your business for sale, you can also begin the tough process of separating your personal future from that of your business.Although you, like most owners, may feel your business is in your very DNA, you’ll eventually see a personal and professional future that’s separate and productive. So a byproduct of putting this whole action plan together is that you’re going to face your future.Before you even get started I recommend that you get a baseline valuation. What is your business worth right now?Even if you’re looking at selling two, three, four years out from now, determining the valuation of the business early on helps set your expectations and allows you to see what you should be working on.Taking a snapshot of your business’s worth in a moment in time is always difficult.Nonetheless, a recommended first step in preparing to sell is to get that baseline measurement by conducting a preliminary business valuation at the start of the sales process.This estimate of your firm’s value against a range of recent selling prices highlights features that make your firm more valuable to buyers. What is it about your business that the market will reward? It helps you to determine what to focus on to improve its selling price.This baseline valuation helps you to understand what range of prices you can realistically expect.If a competitor has recently been purchased by a strategic buyer for a higher price, that precedent may inflate your expectations, you may not get that price.Or the flip side would be getting pleasantly surprised at a higher than expected number.Whichever way it turns out, it’s best to have your feet grounded firmly in reality and to begin to form a plan to improve the business value.

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