Your To Do List – Get Your Business Ready to Sell

February 24, 2017

The ideal time to sell your company is when business is good, the economy is strong, your industry has no clouds on the horizon, and you are looking forward to record performance years. And, of course, you prefer that your health and the health of your business are both good.

Unfortunately, life often gets in the way, forcing a business owner to address selling his or her business at a less than perfect time. That said, there are things that you, the business owner, can start doing now to make your business as attractive as possible in the event you find yourself in a position of “need to/want to” sell your business under less than ideal circumstances.

The following “to do” list can be addressed over time with little cash outlay. And, these concepts can be employed without disrupting your operations or tipping off employees that you might plan to sell your company sooner rather than later.

The following thoughts are based on my first-hand experience of living through unnecessarily difficult due diligence on deals because so many of the following straight-forward concepts had been ignored by business sellers. This list is neither all-inclusive nor meant as an “all or nothing” situation. I recommend that you prioritize the list with the goal of making some progress each and every week. If you follow this approach, when you are ready to sell, your selected business broker will be very impressed with both buyer interest in your company and, later on, just how smooth the due diligence on your deal will go.

  • Clean-up your physical space: office, plant, outside area.
  • Spruce things up with paint, carpeting, lighting, nominal landscaping, etc.
  • If you have customer concentration, start a campaign to land new customers regardless of size.
  • If there is a cash component to your business, either stop it (first choice) or keep a handwritten notebook in ink reflecting daily activity of every dollar received.
  • Similarly, keep handwritten records in ink outlining monthly all owner perks run through the operating statement. It is always smart not to avoid “over the top” perks.
  • Try to clean up your balance sheet by (a) not letting older A/R languish – either collect them or write them off; and (b) liquidate (and write-off) older and obsolete inventory.
  • Have your attorney do a lien search to make sure any and all liens on your business are legitimate and that there are no older liens which should have been released years ago by a former bank (this is surprisingly common).
  • Try to settle any outstanding litigation.
  • Have your attorney review all lease and supplier contracts (if any) to make sure they are user-friendly with respect to being transferable.
  • If you do not have a written inspection/maintenance program, initiate one with regular activity recorded on inspection and maintenance logs.
  • Have your CPA do an informal assessment of your internal financial systems to ensure that potential buyers find them believable and user friendly.
  • Terminate now those poor employees you have been meaning to fire for years.
  • To the extent you do not have standard company documents/written policies, generate and start using them at once. These would include employee manuals containing (among other things) discipline practices, vacation schedules, holiday schedule, absentee policy, dress codes and the like, cash handling and check writing protocol, and job descriptions and organization chart.

If you are able to do a good (and timely) job on 10 or more of the 13 bullet points above, when it comes time to sell your business, the process will go faster, your sales price will be higher, and the often-odious task of due diligence will be (close to) a breeze.

Contributed by Michael Greengard, Praxis Business Brokers.

Through the Michigan Chamber’s partnership with Praxis, we can guide you through a step-by-step process of the complexities, all while maintaining complete confidentiality. To learn more about selling your business, please contact Lindsay Fulton at lfulton@michamber.com or 517-371-7691.