When a business owner decides to sell their company, there are numerous activities that need to be done to prepare for that sale. However, business owners fail to do a number of key things when preparing for a sale which lead to problems down the road.
1. Failing to document their company's operations: Having detailed procedures for how things are done and keeping records of all the company's activities can help to make the transition to a new owner smoother. This is important to ensure the continuity of the business and to ensure that the buyer knows exactly how the business runs. Creating detailed process and documenting procedures for how things are done, keeping detailed records of all the company's activities will be especially important for the new owner. Having good documentation can help to make the transition to a new owner much smoother and can also be extremely valuable when it comes time to negotiate a sale price.
2. Not keeping financial statements up to date: Accurate and up-to-date financial statements are essential when it comes time to sell a business. This can greatly influence the price that a buyer is willing to pay, and not having solid financials can make it more difficult to find a buyer. This includes making sure that all their financial statements are up-to-date and accurate, have been professionally prepared, and that they have a clear understanding of the company's cash flow and profitability. Having solid financials is essential when it comes time to sell a business, as it can greatly influence the price that a buyer is willing to pay.
3. Neglecting to create a strong management team: Having a strong management team in place can help to ensure that the company continues to be successful even after the sale and can also make it more attractive to potential buyers. This includes identifying key employees who will be able to step up and take on more responsibility in the event of a sale and developing a clear plan for how the company will continue to operate.
4. Failing to identify potential buyers: Not researching the market to identify potential buyers can lead to missed opportunities and not getting the best price for the business.
5. Not understanding the value of their business: Business owners often underestimate the value of their business, which can lead to them accepting a lower offer than what their business is worth.
6. Not seeking professional help: Business owners might not be familiar with the legal and financial aspects of selling a business, so it is important to seek professional help from a lawyer, accountant, or a business broker.
7. Not being prepared for due diligence: A buyer will conduct a thorough examination of the business before making an offer, so it is important for the business owner to be prepared for this process.
8. Not having a plan for after the sale: Business owners fail to consider what they will do after the sale, which can lead to uncertainty, confusion and has contributed to deals being scuttled at the 11th hour buy the owner.
9. Not having a thorough inventory of their company's assets. This includes everything from equipment and inventory to real estate and intellectual property. Having a clear and detailed inventory of all the assets that a company has can be extremely valuable when it comes time to sell, as it makes it much easier to accurately value the company.
Business owners typically fail to do proper planning and research when preparing for a sale. This includes things like identifying potential buyers, having up to date and accurate financial statements, building a solid management team, researching the market, and developing a clear plan for how the sale will be structured. In failing to do this, business owners may miss-out on potential buyers or miss-out on getting the best price for their company.
It is important for business owners to start planning for a potential sale as early as possible including having a clear understanding of the key value drivers in their business, by seeking professional help to get prepared, be ready for due diligence and to have a plan for after the sale. By taking the time to address these issues, business owners can greatly increase their chances of a successful sale and increase the final value of their company.