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Getting your business ready for a sale

Steve Sink is the founder and managing partner of Phoenix Affiliates Ltd.

Selling a business can be one of the most important events in a business owner’s career.  Selling a business can also be a complex and mentally draining proposition with the potential to yield great rewards or financial disaster. Business owners often find themselves unprepared and unequipped to successfully manage the process. Preparing your business can mean the difference between a successful transaction or a costly transaction.

Preparing for the sale

Before your business goes on the market, here are some items to add to your bucket list:

Normalize your financials.

To present your financials in the most favorable light to potential buyers, you may want to consider switching from a cash method of accounting to an accrual method. Converting to this method can present buyers with a more appropriate financial image of your company.

Shift from an accelerated system of depreciation to one that shows depreciation spread over a longer period of time. Eliminate any expenses from your financial statements that could be deemed excessive by a potential buyer i.e. owner perks – expensive club memberships, relatives on payroll, etc.   

Clean, professionally audited statements suggest to buyers that your business is professionally and ethically run.

Ensure contracts and leases are up to date.

The terms and conditions of your customer and vendor contracts and equipment leases should be current. If your company assets include real estate, you might want to separate or sell the property (1031 exchange) before your business goes on the market because it has more favorable tax and liability implications. Also, normalize all lease and rents to fair market rates.

Reduce the risk for the potential loss of customers   

Survey your customers to determine issues which would cause them to leave you for a competitor, as well, as understanding why they do business with you. This report card will go a long way to address any perceived issues that the buyer may have and/or allow time to address any actual risks.  

Get the A/R line.

Get your receivables under control. Potential buyers will discount the sale price for late accounts.  

Clean your house- important guests are coming!

A neat, well-maintained appearance tells potential buyers that yours is a successful company. Now is also the time to give internal systems a tune-up and invest in technology and other upgrades.

Document your company’s policies and procedures.

Create policy and procedure manuals which detail the guidelines for managing your business.

Employees.

The loss of employees is a deal killer.

Sale strategies

Meet with your professional advisors to insure that your sale process utilizes the most current tax strategies.  It is never what you sell it for-it is always what do I get to keep!

Start now

Ancient Secret:  It is always better to sell you business when you do not have to sell.

Good Selling

Steve Sink CBI, M&AMI

ss@phxaffiliates.com

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