5 Tricks to get your business ready for sale
- Make yourself un-valuable. Yes, you read that right. The more “needed” you are, the less your business is worth. If you can’t take a couple weeks off without things going crazy, the buyer WILL figure it out. Don’t count on selling to a stupid person. If you cannot remove yourself from the sales function and operations, you are selling your job, not a business. The sales price will reflect that.
- Have your financials in order. Audits are expensive these days, so most businesses do not get one. However, the buyer will rely heavily upon your financial representations. Having an accounting firm review the financials makes buyers more comfortable and yields a higher sales price. Two years or more of reviewed and audited financials is ideal.
- Pump up the profits. Business owners are notorious for running semi-personal expenses through the business. Many buyers will add back these into the profit calculations. However, make the financials clean and remove these items from the business expenses. It’s much cleaner to not have to explain these. In addition, for the two years prior to sale, consider slightly cutting your salary and unnecessary expenses. By trimming expenses to the bone, you will multiply the effect when you sell the business for a multiple of these higher profits.
- Lock up key employees. Employment contracts won’t do you any good. What we are talking about is making sure your key people are happy with the work they do and their pay. The buyer will want lots of help from these key employees, so it’s important that their tenure is perceived as long-term.
- Get contracts from customers. Buyers want predictable future revenue. If you do not have contracts, the buyer must “take your word for it.” You will increase the sales price if you have the buyer legally obligated. Of course, this isn’t possible for many businesses, but know that when you have contracts, you will get paid more for the business.
Bottom line; a growing business that produces real profits and is not dependent on you to succeed is one that others are eager to purchase.