If you are looking to sell your business the best time to put it on the market may be right now. We are five years removed from the Great Recession and the financial markets are booming. However, signs are pointing towards a slow down — that means the opportune “getting out time” may be right now, especially if you are seeking the best possible price for your business.
Here’s what you can do to prepare your business for sale this year:
1. Organize your books.
Your financials may be understandable by you, but if you’re looking to sell, a prospective owner may be put off by your lack of organization. You may not be doing anything illegal or unethical, but your books may be in disarray. Messy accounting can hold up the sale of your business.
You need to go over your books and straighten your records. Buyers are looking for evidence that your business is profitable or at least has the potential for growth. Without one or the other, your business will have a tougher time selling.
To ease your buyer’s mind, hire an accountant to audit your books for the past few years. Audited financials can give a buyer a better understanding how your business has been operating and give them the confidence to move forward.
2. Get a patent.
You have a better chance of moving your business if a patent is secured to protect intellectual property. You might also consider getting your business trademarked to demonstrate that there are no potential hang ups in the mix.
Both patents and trademarks can take some time securing, so plan ahead. Having one or both can represent the crowning achievement for your business and make it more attractive to prospective buyers. It can also yield to greater returns for your business.
3. Review your organizational structure.
Some businesses are much too dependent on the owner. If he or she leaves, the business essentially goes away with it. That point becomes obvious to the buyer when he or she notices that you do the bulk of the work or control the entire decision-making process.
In some business models, tight control is a given, even expected. In such situations your place will be succeeded by a similar hands-on individual. Otherwise, a strong management team with knowledgeable workers is necessary. Without the two your business will look too dependent on you.
4. Get your business valued.
What is your business worth? Do you even know how to place a value on it? This is where a knowledgeable business broker can come in to put a value on your business.
The broker will scrutinize your books, evaluate your sales, project trends and ask you a lot of questions. For instance, if you own the building but the HVAC system is in need of an upgrade, he may take that $24,000 modification in mind when setting a value. He also will look at other factors, such as goodwill, to set a fair market price.
One of the most important factors for any business is cash flow. While profitability is important, if you are having problems with accounts receivable, you may need to address those issues before marketing your business.
The process for readying a business for sale can take several weeks to complete, even months if there are loose ends that need to be tied. Ensure that your business is in order before marketing it and you’ll stand a better chance of getting it sold for its optimum price. Wait too long and the market can turn and your prospects as well as profits may vanish with it.
See Also — Preparing Your Business for Sale