Plan three to five years in advance . Though not always possible, taking the time to prepare a business for sale can add value well above the cost and effort expended. The amount of detail that needs to be dealt with is huge. Steps can be taken to increase the ability to sell your business, while other steps can increase the value. Of course, if you are willing to settle for 10 to 15 percent of the value of your business, you can sell it tomorrow.
Consult your accountant early to review your tax structure . Often, tax structuring itself can take one to two years to devise and implement. Take advantage of spousal capital gains exemptions, and perhaps even those of your children, by using a family trust.
Retain a lawyer knowledgeable in transaction law . The laws regarding the sale of a business are extraordinarily complex and diverse. Ensure that your lawyer is specialized in commercial law as it relates to the sale of a business. Ensure that all legal documents, such as minute books, leases, employment contracts, shareholder agreements, supply contracts, license agreements, distribution agreements and all other legal documents are in order and readily available for inspection.
Retain a competent intermediary . Ensure that your intermediary creates a 100 per cent accurate offering document and that all purchasers are qualified from the “3M” perspective – money, management and motivation. Interested purchasers need to have their financing in place. You want them to have managerial capabilities to ensure that the business will continue to run profitably, especially if you are participating in any financing. A buyer needs to be truly motivated to pursue the acquisition of your business – potential purchasers need to be provided with valuable information about your business for the purpose of preparing an offer. Your intermediary will ensure the information provided is strictly for the purpose of considering completing a transaction with you.
Your intermediary also needs to have access to research on your market to identify both strategic and synergistic buyers while using a NAP (no asking price) program. An experienced intermediary will ensure your freedom from the M&A (mergers and acquisitions) process, allowing you the time to focus on operating your business.
Avoid surprises by completing due diligence before you go to market . Due diligence can be a time consuming and disruptive process. The more prepared you are to answer buyers’ questions, the less time they will require researching your company in depth to develop an offer or complete a transaction. Your due diligence should also include the results of research, which support the future prospects of the company’s revenue and profitability. Remember: the true value of a business lies in the future of that business as seen by the buyer.
Identify and correct any obstacles that will hamper or prevent the sale of your business . Understanding the technological changes in your industry and how they affect your business will increase a buyer’s faith in your business’ future, as well as providing them potential areas for developing new customers. Taking action on impediments can greatly enhance the value of your business and your ability to sell the business.
Most competent intermediaries have a business assessment /valuation capability. Use that capability and establish a range of realistic values. Be prepared with a reasonable expectation of the value for your business. Remember that no two buyers will value your business alike. A small print shop may be an owner/operator opportunity for one buyer, while for another it may be developing a new market territory.
The sale of a business can oftentimes be a long arduous process, taking from months to even years to complete. As ready as you may be, all purchasers will have their own timeframe for completion of a transaction. It is important that you operate your business as though it were not for sale, taking advantage of all opportunities that will maintain or enhance the value of your business.