Many people dream of starting their own company, but if you’re one of the few who has turned their dream into reality, you know that it didn’t happen overnight. Making your business a success involved plenty of research, preparation, and hard work. What few people realize is that selling requires almost the same amount of effort and planning.
Entrepreneurs intent on selling often want to move as quickly as possible: they may dread the emotional letdown and want to make a clean break, or they may be eager to move on to their next venture. Either way, the more preparation time put in, the easier and more successful the process will be. Just as home sellers get a better price when they address maintenance issues and throw on a coat of paint before listing, your anticipatory activities will smooth the way for selling painlessly and profitably.
Where to start? Take a look at your business not only as a seller but also from the perspective of a potential buyer. Examine what’s yours to make sure you’re protected. However, also review the business as a potential buyer to ensure that everything is in order and is as appealing as possible. Here are our recommended steps:
Stay Tuned In to the Business
Once you’ve made the decision to sell your business, there’s a natural tendency to mentally check out. It’s crucial to avoid this, even as you focus on the steps you need to pursue to get the process started and look to your next venture. The success of your sale relies on the company operating at the top of its game. That’s not going to happen if you are distracted or have lost interest. As you approach its last day, put as much effort into the company’s success as you did in its first days.
Make Your Books—and Everything Else—Meticulous
You may have all the numbers and figures in your head, but that’s no help to a potential buyer. They want—and need—to see the pertinent records, go over the books, and double-check to make sure that everything is running as swimmingly as you say it is. They also want to make sure no legal issues are lurking or other surprise entanglements. Not only should you get caught up on your accounts, but take time to update all your other financials, get all equipment maintained, organize your inventory, and gather all pertinent paperwork into a clean package that you can present with pride. Doing so will paint a clear picture of your company as a good investment.
Ensure that Trademarks and Copyrights in Place
You’ve built a brand, but have you secured it? If you haven’t secured the copyright, patent, trademark, or any other protection suitable for your business, your most valuable asset may end up in someone else’s hands. If you’ve been gliding along without the help of an attorney, then it’s past due time to hire one—even if you’re about to walk away.
Establish Your Exit Strategy
Do you intend to walk away once all the paperwork is signed, or do you want to continue to play a role in the business you created? There’s no right or wrong answer, but it's important to figure out your exit strategy before starting the sales process to present your plan as part of the package. Nothing will kill a deal faster than springing a previously unknown detail on a buyer whose plans don’t mesh with yours.
Along the same lines, it’s important to consider what your post-ownership plan consists of. If you’ve already lined up a new gig that provides financial stability, then you’re all set. If not, then your deal may need to include details of deferred payments, stock options, maybe even a consulting fee, or other paid position for a period of time. Consider your tax liability from any gains you realize from the sale. If your company qualifies as a qualified small business you may be able to defer the federal tax on your capital gains.
Take A Good Look from the Buyer’s Perspective
Once you’ve taken all the steps to prepare for a sale and protect yourself, take a final hard look at what you’re putting on the market. Just as you’d walk through your house and give it a once-over before you have an open house, you need to scrutinize the way the company’s assets look from a potential buyer’s perspective to see if there’s anything else you could have done to optimize or reveal its appeal.
In addition to each of these steps you can pursue on your own, it is worth considering bringing in an expert to help you with valuation and the sales process. Not only will they guide you through what can be a challenging process, but they will also ensure that you haven’t overlooked any important legal requirements.
If you need assistance cleaning up your books in preparation to sell your business, give us a call or book an appointment.