Will Your Business Be Ready to Sell When You Are?
Our friends Scott and Susan decided a year ago to sell their very spacious home. The kids had all left, and upkeep was getting to be a burden. Once they made this decision, they started fixing things that hadn’t seemed like a big deal- replacing a leaky faucet, tightening a loose door knob, and so on. They hired a painter to give everything a fresh look, and replaced some tired, dated wallpaper in the bathroom. Susan set about cleaning out closets, and Scott gave up a few Sundays of golf in order to sort out the attic and the garage.
When the time came to put the house on the market, their realtor was very impressed, telling them the home was in perfect shape for showing to prospective buyers. As a result, even in a tight market Scott and Susan’s home sold in just two months.
For a business owner, the process is remarkably similar. There are some simple steps which can be taken to prepare a business for sale, which will often result in a higher valuation. Here are a few of them:
Deferred Maintenance – Just like a homeowner, business owners sometimes put off things like maintenance on equipment or building repairs, especially when budgets are tight. Buyers react the same way when visiting a business for sale as they do when going to an open house. First impressions count. A company with orderly, clean, well-maintained facilities and equipment tells the buyer that management is on top of things.
Clean Financial Statements – Audited or reviewed financial statements give prospective buyers a lot of comfort, and are well worth the investment of time and money to prepare. Having them will reduce the amount of time the buyer needs to spend during due diligence.
Contracts and Agreements – Make a master list of all contracts and agreements. This includes things like contracts with customers and vendors, employment agreements, leases, licenses and the like. Make sure you have signed and dated copies of all agreements. In a sale situation, buyers need to understand what obligations the company has, and whether any agreements will need to be transferred or renegotiated as a result of a transaction.
These are just a few areas where failure to plan ahead can mean frustration and delay in a sale process. Even if you have no thoughts of selling in the near future, it’s not a bad idea to address them anyway. You never know when the situation might change, whether due to illness, divorce, or perhaps receiving an offer that’s too good to refuse!
Whatever the reason, when you get ready to sell, the process will go much more smoothly if the company is ready to sell too.