Clean Up Your Business Pre-Sale
Before selling, do what you can to clean up your operations:
- Get your financial statements in order. Make sure you’ve got a clean balance sheet representing exactly what the buyer will be buying.
- Review all legal documents. Make sure your minutes are up-do-date and that all contracts and agreements are current and won’t present any problems for the buyer.
- Clean up the facilities to give the impression of a well-run and organized business.
- Sell or dispose of any obsolete inventory, non-used equipment and personal assets.
There are many things you can do to improve the first impression of your business and maximize its value, if you have the time. Consider planning to sell your business one, two or even five years before you want to exit the business if you want the opportunity to make significant changes.
You will also want to strengthen contractual relationships with customers, suppliers and employees. This means asking people to sign contracts agreeing to do essentially what they are already doing. For example, you might ask employees to sign confidentiality agreements pertaining to certain processes or other trade secrets. Or you might ask a supplier who has agreed to give you a deal to put the agreement in writing.
Strengthening contractual relationships ensures that the relationships pass on to the buyer. This should be done at least six months before the business is placed on the market.
If you do not already have management in place, now is the time to replace yourself. Buyers do not like businesses that are closely tied to the owner. Strong management reduces the risk for the buyer because he or she can be confident that the business will continue to be run in the same way.