Ideally, you should have an exit plan the day you start your business. If you have not done that, start working on your exit plan 3 to 10 years in advance of selling your company. The completion of a sale can take over a year, so keep that in mind as you plan your exit strategy. Here are several basic steps you should take to get your business ready:

Ten Ways to Prepare Your Business For Sale

1. Know the value of your business

Every business owner should get an annual valuation on their business; this is the best indicator of a company’s financial performance. A third party business valuation or a broker’s opinion of value will give you a basis for setting the selling price and will give you an idea of what you can expect to net from the sale. It will also tell you your business’s market position, financial situation, strengths and weaknesses. These things you can correct prior to putting your business on the market.

2. Keep focused on the business.

Don’t let your business performance decline because you’re too focused on the sale of your business; and don’t become “emotionally divorced” from your business. Work on your business as if you don’t plan to sell it. Ideally, you want to see your business grow while the business is on the market.

3. Understand your true owner’s discretionary earnings.

Most small businesses claim a variety of non-operational expenses. Make sure you have supporting documentation for these expenses. For example, your business may be paying for your personal automobile lease. In addition, there may be infrequent expenses you have incurred during the past three years that should be excluded in a buyer‘s analysis of recurring cash flow; i.e. one time legal expenses.

4. Consult your financial advisor.

It’s wise to speak to your tax advisor for help planning your financial future. Understanding your personal and corporate tax situation may also help you recognize your options with regard to deal structure.

5. Maintain confidentiality.

This is critical to the health of your organization. If your competitors, customers, employees or vendors find out that you are selling, this could mean disaster for your company! You can lose key customer and/or employees and the value of your business will fall.

6. Get revenues and profits up. 

Your business should be growing; both top line and bottom line. It is best to become the number one or two largest company in your market. If it is not, enlist some help from a business coach to help you get the business going in the right direction.

7. Consider management succession.

If you’re the only one that can run your business, who will a buyer be able to turn to for help running the business after you leave? You should have a succession plan in place before trying to sell your business.

8. Know your reason for selling.

Buyers are always curious as to why you want to exit your business; if it’s so great, why are you leaving? Be prepared to discuss your reasons.

9. Get your books and records in order.

Buyers evaluating your business generally require at least three years’ worth of financial information. Hire a CPA to prepare your statements; this will give the buyer confidence in your financials and later it will shorten the buyer’s due diligence. Tax returns may not be sufficient for the buyer. Also get your legal documents in order. Get a due diligence checklist from your IBBA certified business broker and compile all documents into one place.

10. Don’t wait until you are in a position of weakness.

Sell from a position of strength; when your business is growing, when it is making lots of money, and when you love it! You can command top dollar when your business is strong. Unfortunately, many owners wait until an economic turndown, a health crisis, burnout, or a divorce forces them to sell from a position of weakness.

Empire Business Brokers of Greenville Spartanburg, South Carolina is a proud member of the International Business Broker Association.

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