Seven things you must do before selling your company: part 4
Editor’s note: This is the fourth of a five-part series on preparing yourself and your company for sale to maximize your outcome. Read part one, part two and part three.
Preparing your company for sale includes more than just improving the value drivers and fixing the value detractors in your business. It also means getting your overall house in order to be the best product on the market. Business owners are all getting older, and those that missed going to market before the recession hit in 2008 will all be looking for an opportunity to sell their business when the economy improves.
This means that there will be a huge number of businesses going on the market over the next few years, and those that are best prepared will sell faster and get better prices than those companies that are not prepared. Be ready in all areas of your business, and specifically during prospective buyer visits and due diligence.
Visits and due diligence is an opportunity for the buyer to look at your company and all areas of your business. The process is similar to staging your house for sale…those that are staged better sell quicker and at a higher price. That is where “getting your house in order” comes into play in your exit planning process.
6.) Get your house in order
Getting your house in order involves focusing on those last few areas in your business that will be reviewed by a prospective buyer. In many respects, these may be areas of your business that should have been kept up over the years but you never really got to them. They may be general housekeeping, paperwork or legal issues.
You need to present your business in the best light with prospective buyers and the following are some examples of areas that could trip you up:
A.) Pick up your office – You will be brining prospective buyers through your facility, so make sure it looks the best possible. This includes cleaning carpets, purge files of old information, organize your production or development facility, and have all employees pick up their areas. Prepare for this process just as you would an important customer visit to your facility. First impressions are important with the buyer.
B.) Clean up legal issues – Take care of any pending or current legal disputes in your business. This can kill a deal or at the very least provide negotiation power to the buyer. This includes making sure all software in your business is properly licensed.
C.) Normalize earnings early – Most privately held businesses legally manage their profits to minimize taxes. Adjust or normalize your earnings well before going to market. The last thing you want is to be in a weak position at the negotiation table, and starting this discussion with talk of adding back profit due to your business practices immediately puts you in a weaker position.
D.) Eliminate baggage – Settle disputes with your employees, customers and suppliers before going to market. These areas will surface during due diligence and could hurt your chances of maximizing the price you receive at the time of sale.
These are only a few areas to review and fix prior to going to taking your company to market. By reviewing those areas in your business that represents risk to an outside buyer, you can be prepared for the due diligence process and maximize the value you receive from the sale of your business. More in-depth information is available in my book, Owner Exit Planning: Leave on your Terms.
Coming up: Managing through the process.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com