Are you planning on listing your business for sale? You may be ready to sell the business immediately, offering it for sale “as is.” You are likely prepared to make price concessions to account for any of its unaddressed weaknesses. On the other hand, you may have decided to delay listing the business for sale until you’ve made the necessary improvements to overcome weaknesses to make it more attractive to prospective buyers.
Business for Sale: A Pre-Sale Checklist for Selling Your Business
The following pre-sale checklist is a great way to start preparing your business for sale in an organized and efficient manner.
Flag areas for pre-sale improvement
Make a list of the processes, procedures, products, or services within the organization and rate them as either: good, average or poor. This can even be done by a departmental basis. The primary aspects buyers will look for include: legal condition, business image, business operations and organization, products, clientele, and transferability. Buyers are attracted to businesses with low risks and high rewards, and these are the aspects of your business they will look for when considering it as a possible purchase. It’s also a good idea to be aware of weaknesses early on to offer a mitigating solution when potential buyers point those weaknesses out.
Commit to a pre-sale improvement action plan
Once the problem areas and weaknesses of the business have been identified, take note of the ones that can be fixed now. Remember that it’s important to eliminate as many of the business’s current challenges as possible to present the true potential of the company to a buyer. Additionally, eliminating the areas for improvement now can lead to a higher cash flow, which means the potential for a higher cash flow multiple and increased likelihood of receiving at or above asking price. That said, this part of the process is about committing to take action and make necessary improvements before listing the business for sale. Think of it like getting a leaky faucet fixed and a bad light fixture replaced when preparing to sell a house.
Create your pre-sale improvement plan
Now that you have identified the problems areas and are committed to getting certain aspects of the business “cleaned up” before listing the business for sale, how exactly will you do it? This step involves taking careful and precise action on what exactly you will do, how you will do it, and any experts or advisors that you will involved in the business improvement process. Be mindful during this step to take note of expenses and the cost of making changes as some improvements are terribly expensive and do not provide much of a return on investment. At the same time, an expensive fix to the business for sale could be the difference between selling the business and not at all.
Sale confidentiality
Maintaining a level of confidentiality is extremely important in the business sales process. If word of the sale leaks out to customers, suppliers, creditors, employees, or competitors, this could instigate a negative reaction, interfering with your business’s operations and affecting its value. If more than the owner has access to the business email, it’s recommended that the Seller use a personal or separate account to help maintain confidentiality that the business is for sale. There have been cases where good employees have gotten wind of the sale and have left out of fear, causing the need to replace them or killing the sales transaction altogether.
Add value to your business now
Whether you choose to sell your business “as is” or make the necessary improvements to improve its value and attract more prospective buyers, this to-do list is a great way to assess the condition of your business and create an action plan going forward. Even if you plan to list the business for sale sometime in the near future, these action items are still good practices to follow to prepare the business and get the highest value for asking price.
If you are ready to start the discussion of how to prepare your business for sale or to discuss a Business Pre-Sale Checklist, contact one of our business brokers today for a complimentary consultation.
Article: BizBuySell
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Edwin Mysogland, CVA, CEPA, CMEA
Managing Partner, Indiana Business Advisors
Indiana Business Advisors is the top business brokerage firm in the state of Indiana and one of the largest in the Midwest. Whether you are looking to a buy a business or sell a business, Indiana Business Advisors has the expertise and experience to get the deal completed. With over 40 years of history and 2200 businesses sold all over the United States, our team will work diligently to achieve your professional and personal goals.