In November, we celebrated National Entrepreneur’s month across the country. It’s a great time to celebrate the successes you may have had an entrepreneur or those successes of your family or friends. As the year comes to a close, many businesses look towards planning for the upcoming year(s). In that same vein we thought it would be helpful to look at something that many business owners often overlook: Getting ready to sell your business. Even if you’re not currently thinking about selling your business, it’s important to start preparing and take the right steps to get you ready. In fact, many of the steps are best practices for businesses no matter how old they are.
While it’s a bit old, Entrepreneur magazine had a fantastic article on what steps you should take to make sure you’re prepared. Inevitably, your business will have additional steps you need to complete, but this is a very good basic start:
- Get a business valuation
- Get your books in order
- Understand the true profitability of your business
- Consult your financial advisor
- Make a good first impression
- Organize your legal paperwork
- Consider management succession
- Know your reason for selling
- Get your advisory team in place
- Keep your eye on the ball
As you can see, many of these things are best practices that every business should be doing regardless of the stage the business is in.
We recommend that the first thing you do is to put together a good team to work on your behalf. Most likely you’ve got these people already available to you and are already working with them. The three key people are your accountant, your attorney, and your personal financial advisor. You want those three people to work as a team for you. They each will be able to help you with parts of your preparation for a sale, but you most likely don’t have a financial planning, legally trained accountant.
Often times one of these steps will lead to another and your team will need to work together. For example, as your accountant is developing the valuation, the way that your company is structured can have a significant affect on the value of the business. How well you have kept your corporate records can change the type of sale you will be able to complete. Will it be a stock purchase or an asset purchase? Are you in good standing with the state and have you filed your meeting minutes with the state if you are an LLC? You may also want to look at any contracts that you may have and how that positively or negatively affects the valuation.
Once you do get that valuation, you’re going to want to understand how that will affect your personal finances. You will want to make sure that you have the appropriate accounts in place and strategies for what to do with the money that you have worked so hard for. We don’t bring all of this up to scare you, we bring it up because this is our area of expertise. You have worked hard to build your business and that is your expertise, but we strongly suggest working with people that know all the rules, regulation, tips and tricks when it comes to selling a business. You have trusted advisors that work in this field, it’s worth it to use them to make sure you get the best result possible.