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by | Aug 27, 2024 | Broker Advice, Business Valuation, Sell Your Company

bool(false) How to Prepare Your Business for Selling

How to Prepare Your Business for Selling

Accounting

  1. A computerized accounting system, such as QuickBooks Online that allows digital output can be used. Buyers will appreciate having a clear and accurate financial picture of your business.
  2. When possible, consider accelerating depreciation. This will increase your seller’s discretionary income and cash flow, impacting your asking price.
  3. Keep your P&L clean of non-business expenses, such as personal travel, entertainment, or vehicles. This will also boost your seller discretionary income (SDE), the main indicator of your business value.
  4. For businesses with over one million in seller discretionary income, consider getting a third-party CPA to provide a quality earnings report, adding credibility to your numbers. Most buyers will require this for transactions with over two million in seller discretionary income. Accounting credibility will allow you to push for a higher multiple in your asking price.
  5. Review your A/R aging and collect any overdue accounts. Buyers will not pay for receivables older than 60 days.

Appearance

  1. Clean up the front reception area to make a good first impression. Consider investing in new floor coverings, window coverings, and a phone system. You may need a professional with a good eye for design to help you with this. The design costs can be deducted as a one-time extraordinary expense, so they will not affect your discretionary income.
  2. Clean and organize your inventory, equipment, and work area. Get rid of any obsolete or damaged items. Make sure everything is in good working order and well-maintained.
  3. Update your website, social media, and marketing materials. Ensure they reflect your current products, services, and brand identity. Many buyers will check your online presence and reputation before they contact you, often looking at Google reviews. If you have a negative review, fix it. Do what you must to satisfy the customer and get a five-star rating.

Valuation

  1. You can get a professional valuation from a reputable business broker or appraiser. Do not rely on your estimate or online calculators. A professional valuation will give you a realistic and defensible price range for your business and add to the price multiple.
  2. Understand the factors that affect your business value, such as industry trends, market demand, growth potential, customer base, competitive advantage, and risk factors. Be prepared to explain and justify your strengths and weaknesses to potential buyers.
  3. If any customers represent more than 10% of total sales, let’s discuss it. This could be an issue we need to deal with.
  4. Have a clear and compelling reason for selling your business. Buyers will want to know why you are selling and your plans after the sale. Be honest and consistent with your answer.
  5. Prepare a confidential business profile that summarizes the key information about your business, such as history, products, services, customers, employees, financials, and asking price. This document will be used to market your business to qualified buyers who have signed a non-disclosure agreement.

Please call Bob Dolan for a Free evaluation at 954-579-4687. Bob Dolan is a licensed Real Estate Broker with over 45 years of experience selling businesses like yours.

Free Confidential Evaluation

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