If you are a business owner, the decision to sell a business is a major step to take. Preparing to list your business for sale is a major undertaking in itself and steps should be taken to ensure that your company sells as quickly as possible and that you achieve the best selling price.
Here is a list of some things you should keep in mind before your list your business for sale.
Equipment and machinery maintenance
It is important to ensure that your equipment is properly operating and serviced. A potential buyer will investigate the condition of your equipment and if it is not operating properly that could raise a red flag. If you have a service or maintenance contract it is advisable to have these records available.
Overall appearance of your business
It is highly advisable that your business for sale be kept in a neat and tidy condition. All customer areas as well as plant or shop space should be well organized, and in immaculate condition. An unkempt business operation is an indicator to a business buyer that perhaps the overall business is not properly manages.
Relevant operating procedures documentation
A business buyer may be intimidated by the prospect of owning and operating a business so it would be advisable to set his or her mind at ease by providing documentation on critical procedures required to run the business. Documented operating procedures should be prepared prior to listing your business for sale.
Information about your customers
One of the main questions a buyer will ask about your company will be about your customers. How well do you know your customer base? You should know who your top customers are, what percentage of sales your best customers represent and make note of any special circumstances (example – long term customer contracts, major new accounts, etc).
Be prepared to discuss staffing issues with a business buyer. You should know the current level of staffing, what each person does (position descriptions are helpful), how much payroll represents and if there are any seasonal issues or special skills needed with respect to your employees.
Take a physical inventory
Just before your put your business for sale you should do a thorough inventory. Buyers will ask about inventory levels so it is recommended to have an accurate record to preset when asked. Discard any unsellable items and keep your stock area organized and tidy.
Be open about any legal issues
Be forthright about any legal issues that the company may be facing. Offer this information to potential buyers. The worst thing you can do when you list your business for sale is to keep information hidden. A prudent buyer will uncover these issues during due diligence. Frankness is the best policy.
Besides a Realtor, you will need to retain the services of a lawyer and accountant in order to sell your business. A lawyer is a key person to retain to review all contracts and agreements before you sign them. An accountant will help your with the accounting issues, financial due diligence and taxation issues that are triggered at a business sale.
You will need to have some significant financial information in order if you want to successfully list your business for sale and attract good buyers. Ideally, you should have 3-years of financial statements that have been prepared by an accountant. You will also need to have income tax returns, the most recent period’s P&L, sales tax returns, bank statements, employment tax filings, A/R and A/P aging schedules, inventory schedule and asset list – among other things!
Listing your business for sale is a big decision. Getting prepared with exit planning before you list your company with a business broker is the best advantage you can have to sell your business with confidence.
Contact us to discuss how we can help you to sell your business.
Please contact Vijay Gandhi at (647)267-6338 for a confidential consultation to determine the best of your business.
Serving the Greater Toronto Area & southern Ontario-Golden Horse Shoe.