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Things to Consider when Preparing to Sell a Business…
If you are planning to sell your business, here are some of the things you should be considering:
Review your tax situation with your accountant and lawyer to be sure that your taxes will be minimized when the sale is made. This is particularly important if you are a C corporation. Remember it’s not just what you sell for it’s what you get to keep.
Be sure that your accounting records are in good shape. Buyers will want three years of financial records. Your business and tax records must be consistent with each other. Be sure that you can explain any variances between them. Expenses must be recorded consistently from year to year. Be sure that the buyer can verify any perks you take out of the business. Have your bookkeeper or CPA make sure expenses and revenues have been entered in the correct journal accounts.
Buyers are looking for an income and an opportunity. They need to feel comfortable that the business will continue to generate the income they need. They also want to be their own boss and see an opportunity to have a growing, successful, business. Here are what additional steps you can take to make the buyer comfortable.
Document your procedures, business practices, and everything someone would need to know to operate the business. One reason that franchises sell for more is the support system they give to the owner. The more you can duplicate this, the more desirable your business is. It makes it easier for the new owner to learn the business and train associates.
Develop managers and cross-train employees as much as possible. The buyer wants a business that can operate without you. Cross training makes the business less dependent on particular employees.
Control your expenses. Since the buyer is looking at three years of results, you need to control expenses well before you put the business up for sale. As a rough estimate, every dollar in expenses that is saved can generate two to three dollars in additional purchase price. You need to continue to make the capital investments that the business needs. But, don’t make them as you get closer to the sale date unless the payback period is short. This would be a good time to have an ROI agent look at you major expenses with our expense reduction review.
Negotiate a lease with provisions that will not hinder the sale. The landlord will want to approve any buyer, but you can request that this consent is not unreasonably withheld. If you are personally guaranteeing the lease, have it end when the buyer takes over. Be sure the lease is in writing. Be sure that the lease, with options, has a minimum of five years left on it when the business is sold.
Spruce up and clean up the business. Take an objective view of your business. Get rid of the clutter. Organize it. Make it look attractive. Give it curb appeal for any buyer that drives by. Click here is you are looking for a Maryland Business Broker
Finally, but not necessarily the last thing to do, is to diversify your personal life and finances. Think about what you would like to do after you sell the business. Make investments outside of your business.
These are some of the more important things to do to maximize the price you will get when you sell.