Owning and running a small business is often the most challenging yet rewarding event in an individual’s life. Many entrepreneurs dream of the day when they will design an operation successful enough to sell to an outside party and ride off into the sunset. What many forget is that the process of selling a business requires a great deal of preparation that should start years in advance to make sure the sale goes smoothly and there are no unforeseen legal complications.
One of the great mistakes owners make is not looking at the long-term future of their business, often leaving records and descriptions cluttered, hoping to clean it all up when it comes time to sell. The sale of a given business in America is under heavy scrutiny by the government. The most important aspect is the proof of the seller exercising his or her “due diligence”.
Due diligence for the owner means looking at and reporting your business’s information as if you were the party looking to buy it. Any inconsistencies or unclear records from the start of your business need to be cleaned up and kept immaculate. Depending on the size and complexity of your business, this can take anywhere from one to multiple years. This can be especially pertinent if your business’s infancy was disorderly and cluttered because of the challenge of simply getting your project off the ground. One of the great mistakes owners make is thinking that preparing business records for a sale is a brief period, but the process can go much smoother if overseen systematically.
One’s books and records should be extremely easy to understand. Buyers understand that business owners will seek tax write-offs every year but are the reasons clear. This is important not only for the buyer but for reporting to the government. Many novice business owners either are unclear in their write-off reporting or disingenuous. While this can lead to short-term savings, it can lead to legal/financial disaster when one is looking to sell his or her business.
While your staff may be comprised of excellent workers, you must keep their specific roles and job descriptions up to date. This does not have to be very intensive, but having clear salary, title, roles and job descriptions in place for your employees will make your business more presentable to a potential buyer. Vague or uncertain terms can leave buyers feeling nervous or confused. This is true both for finances and employee information.
Business owners who have had a future business plan in place, but never had the time or resources to implement it, can pass this on to a buyer. Sellers can discuss the generalities of a potential 5-year plan to sellers, essentially selling the potential of their business. Sellers can show buyers a lucrative future of their business that had never been previously considered.
Overall, business owners who are looking to eventually sell their businesses need to focus on three fundamental issues. The first is constantly keeping meticulous financial records throughout the life of the business, not trying to clean up years of messy finances at the point of sale. This is important not only to present a clear picture to the buyer but to avoid any repercussions from the government. Second, sellers need to realize that positioning your business for sale is a marathon, not a sprint. The process can even take multiple years, but it can be made much easier if you are thorough and clear in your business documentation.
Third, sellers should consider investing in a Certified Business Valuation by an accredited professional to aide in the ultimate negotiations for the selling price of the business.
In every step of the way from planning, financing, starting, to selling your small business Corporate Business Solutions Consultants is devoted to helping you in all aspects of your journey.