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Thinking of selling your business?
It pays to be prepared
Are you considering retiring from your business?
Or has financial hardship forced you to try to find a way out?
Whatever your reason for wanting to sell your business, it pays to
do a substantial amount of preparation well in advance to ensure
that you get the best return on your investment of time and money.
Make sure your financial house is in order. A
very important part of the valuation process during the sale of a
business is financial records. It will pay off in the form of a
higher valuation if your financial records show your business in its
best light. A thorough examination of your accounting records by a
qualified financial professional (audited or not) will result in a
better foundation when any of the more common valuation processes
are applied.
Examine your contracts. The old saying goes
that "you are judged by the company you keep". This can be applied
to your existing contracts with vendors and strategic partners. If
you have contracts that are clearly underperforming, a potential
buyer may see these as a negative. When possible, cut loose
contracts that are underperforming, outdated, or costing your
company more money to service than the benefit you are receiving.
Document your processes and procedures. The
reality is that a potential buyer's vision for your company may not
include you or your staff -- whether that is your intention or not.
It will be necessary for you to make sure that all processes,
procedures and policies that are in place -- formally or informally
-- are properly documented to ensure the smooth operation of your
company after the sale.
Inform your employees. If your employees are
an invaluable part of your company's success, it is in your best
interest to keep them well informed regarding your intentions to
sell your business -- particularly key employees. Employee retention
may suffer if your employees are caught off guard by a sale. Make
sure you are as specific as possible about how a potential change in
ownership will affect their position and address all concerns that
they may have regarding the sale. If employees express that they
will not choose to stay after the sale, it may be best that they
leave prior to the sale to avoid the appearance of a mass exit when
the sale is finalized.
Make appointments with your business advisors.
In most cases, consulting with your attorneys and financial
professionals such as tax and investment advisors is a critical part
of the preparation process. These professionals can give you
valuable guidance regarding potential changes you may want to
consider such as a change your business' entity type (e.g., from
sole proprietor to corporation) and make sure that all of your legal
and financial documents are in order.
Selling your business may be the biggest
transaction that you are involved in in your life so it pays to take
the steps necessary to ensure a smooth transaction. If you are
planning to sell your business in the near (or not so near) future,
please contact the office for additional guidance.
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