1. Get your books in order. A buyer evaluating your business will usually ask for at least three years’ worth of financial information. The more formal your statements, the better. In many situations, your income tax returns will be sufficient.
2. Understand your profitability. Many closely held businesses claim a variety of nonoperational expenses as deductions. Make sure you have supporting documentation for these expenses. For example, your business may be paying for your personal automobile lease.
3. Make a good first impression. Your buyer is going to be more interested if your company shows well. An orderly shop is usually indicative of a quality management team and operations.
4. Make sure your legal paperwork is up to date. Review your incorporation papers, permits, licensing agreements, leases, customer and vendor contracts. Make sure you have them available for your buyer and his team to review.
5. Consider management succession. A big question for the buyer will be, who is going to run the business after it is sold? Who are the key managers? Do they have employment contracts or non-competes?
6. Know your reason for selling. The buyer is going to ask you why you are selling. Be prepared with an honest and articulate answer.
7. Get your team in place. Make sure you have an experienced attorney and accountant on your team. You may also want to consider a business broker or an investment banker to help you through the process.
Selling, or trying to sell, your business can take a lot of time and mental energy. So, as you work this process, don’t let it become such a distraction that the performance of your company suffers. Allow, your advisors to help you through the process, while you keep maximizing the value of business.
Paul Kellogg is an attorney in Cincinnati with the Phillips Law Firm, Inc. Paul’s practice focuses on providing comprehensive estate planning and probate services to families and business owners, as well as serving as outside general counsel to entrepreneurs and businesses where he provides guidance and advice on a wide variety of transactions and disputes. He can be reached at (513) 985-2500 or via email at [email protected]. Please explore Paul’s other articles on estate planning and business on the Phillips Law Firm Blog page.
The article is for educational and informational purposes only and does not constitute legal advice. Anyone contemplating taking legal action is urged to obtain proper legal advice from an attorney licensed in your particular jurisdiction.