Selling A Business: Prepare Your Documents
Six steps to prepare your business for marketing.
Before you contact a business broker to arrange the sale of your business, you’ll want to review your company’s financial records and documents to ensure that this information accurately reflects the state of your business. A healthy balance sheet will aid your cause, therefore an appointment with your accountant may reveal some steps you can take to help prepare your business for sale.
1. Sell Excess Inventory — Unsold inventory won’t help your bottomline, therefore if you don’t need it, then sell it now. The proceeds from that sale will help sharpen your financial picture and remove from inventory anything you do not want to include in the sale. This may also include equipment not needed to run your business such as an extra delivery truck or unused office furnishings.
2. Step Up Receivables — Past due accounts need to be brought up to date. Work with your accountant on a plan to get outstanding invoices paid up. He may advise you to write off bad debt or settle with a customer who cannot pay in full. Consider offering a nominal discount for customers who pay quickly, for example, 2/10 or 2 percent off for bills paid within 10 days.
3. Pay Down Debt — A debt-laden business is worth much less than one with a clear and unhindered financial picture. Pay off short-term debt and, if possible, tackle long-term debt too. Less debt on hand means you’ll have a better credit rating.
4. Maintain Good Credit — As you prepare to list your business for sale, don’t forget the creditors that have helped your business to thrive. Keep paying your bills on time and obtain copies of your business credit reports. Address items in the “negative” category advises Experian and have incorrect or outdated information removed from your report. States Experian, “If you have good credit, requesting a credit line increase can improve your credit even more because such an increase lowers the percentage of your available credit in use.”
5. Contracts and Lease Agreements — Make copies of your current contracts and your lease agreement, documents qualified potential buyers will want to review when they’re considering buying your business. If your lease is coming due, be prepared to negotiate the most favorable terms possible. Review your agreement to ensure that it will be transferrable to the new owner.
6. Resolve Consumer Complaints — Will a buyer see that your business has a good reputation or is there some unresolved issue that needs to be addressed? Contact the Better Business Bureau to work through outstanding complaints. If there is a legal matter on the horizon, consult with your company’s attorney to settle the matter. Lastly, ensure that your online reputation is spotless.
It may take several months to get your business ready for sale to qualified, potential buyers. Look at it as time well spent, spelling the difference between selling your business or being stuck with something that nobody wants.
This series is sponsored by the Novars Group Business Brokers, with executive team members Krayton M Davis and Ray Smith at your service.