Five Critical Things to Do Before You Sell Your Business

Mike Ginsberg,
Kaulkin Ginsberg

The volume of mergers and acquisitions has increased this year with strong signs this trend will continue into the foreseeable future. With that, the volume of solicitations from buyers wanting to talk about buying your business will also increase. This is good news for owners contemplating a sale in the short term.

But what if you’re not in a sale mode today?

If your strategy is to eventually sell your business, at some point down the road when you’re ready, and achieve the best possible price and deal terms for your business, then this blog is intended for you.

The ideal time to start preparing for a business sale is years before a sale process begins, so that you and your team have time to position the business and its components for a change of ownership. Here are several foolproof steps you may want to take now.

1. Get your house in order. Invest the time and resources now to make sure your business is performing at its highest possible level when it comes time for a sale. For a service business, this means having a qualified leadership team in place that can run, and grow, the business without you. This also means making the necessary capital investments into the business instead of pulling every last nickel out of the business.

2. Make sure there is meat left on the bone. It is always best to sell a business during an upswing and not when the business has peaked or worse started to decline. You know the seasonality of your business and you know how your client contracts work. Evaluate and plan for the optimal time to sell.

3. Make sure the buyer sees a bright future. A buyer will focus on historical and current performance when they set pricing and deal terms, however no buyer ever acquires a business without any intention of growing revenues and/or increasing profits. Give the buyer the tools they need to value your business most aggressively. For example, create an annual budget and show evidence that you understand your business by performing according to the budget you set. Have a working (not static) business plan that you re-evaluate on a routine basis as market conditions change.

4. Take a walk through your operation. Are wires protruding from under your cubicles? If they are then get them removed. Are papers stacked everywhere? If yes then go green and get rid of them. Are workstations professional? If not then clean them up. I encourage you to walk through your business on a regular basis and straighten it up. A commitment to a strong work environment goes a long way to a successful business transaction.

5. Consult the experts. If maximizing after tax dollars is important to you then consult your tax expert now to make sure you’re doing everything you can to achieve this goal. Spend money on an expert transaction attorney who can help you facilitate the best possible outcome, instead of using your corporate counsel who might not be an expert in M&A. And at the risk of sounding self –serving, hire an intermediary who thoroughly understands your market and has an established network of qualified buyers to approach on your behalf.

The more you do now for your business, the better prepared you will be when it comes time for you to sell.

If you’d like to confidentially speak with Mike Ginsberg, President and CEO of Kaulkin Ginsberg, about your business’ needs, please contact us.