6 steps to prepare your business for sale
Many times, a business owner looking to sell off their venture has to let go of a lucrative offer simply because they are not prepared for it. There is no stringent sales strategy, no detailed tax plan and/or no financial records. A lot of them even forget to take out any necessary provisions for their business partners, or any family members who may be involved in the business in some way as well.
In such a situation, can one really blame the potential buyers for backing out? Lack of proper planning indicates a lax attitude on the business owner’s part and it is but natural for the former to get apprehensive about investing then. After all, to fully maximize a sales deal whilst protecting your assets at the same time, one needs to have a solid strategy in place before any paperwork can be initiated.
As such, selling a business has a direct impact on your cash flow, taxes, wealth and lifestyle. That is why we recommend considering your time frame and thereby, coming up with a succession plan accordingly, lest you have to forgo another great opportunity.
Consider these six steps to prepare your business for sale. The process is somewhat basic but rest assured, it will go a long way in helping you secure a profitable deal.
Create a sales strategy
If you fear getting way in over your head, seek help from professional organisations like Lloyds Business Brokers. There are people skilled and experienced in maximising the financial and emotional values a business holds.
These trained specialists will outline a sales strategy in accordance with your business objectives and also build a team to expedite the sales process. Most importantly, however, they are an unbiased resource. Professional wealth advisors will be able to best guide you through all the aspects of selling your business, be it legal, taxes or recruitment.
Consider selling over a period of time
Granted, a normal sale involves an immediate transfer of goods or services once the money has come through. But why not delay the process and offset the tax impact?
You can sell your business on an instalment basis. In other words, your investor will send in payments over the next few years, thereby affording you the opportunity to recognize gains over time and avoid higher taxes. Of course, make sure they will meet their payment obligations. This kind of sale is only advisable if you are confident that your buyer won’t flake on you.
Create a tax plan
It goes without saying that completing your tax planning before a potential sale can help circumvent penalties and minimize deductions of all kinds. Again, we recommend hiring a professional for assistance.
Tax advisors can help establish your income expectations for the year, calculate the amount of taxes you will have to pay and of course, determine which tax payments are required before the sale, along with year-end payments.
Declutter your finances
Before putting your business on the market, make sure you have streamlined all non-direct expenditures relating to it. These could be insurance payments, salaries for non-working family members, expense accounts and accommodation, cars, etc. – anything that you might have been using against your business.
The general rule of thumb is that anything that a potential buyer would not want to pay ought not to be there at all.
Sort out your finances
Yes, we suggest asking a professional accountant to help with this as well. This is because, like we said earlier, they will be an unbiased source with nothing to gain out of the deal.
Accountants will conduct an in-depth analysis of your financial statements, identify any potential issues and so, guide you on how to rectify them. In fact, they may audit the overall operations of your venture, such as its organisational culture and the level of employee satisfaction overall.
Look for different kinds of buyers
Undertake a thorough business review. This will keep you abreast with all your customers, vendors, license agreements, buying/selling agreements and anything else that may help attract a buyer.
The idea is to tie up any loose ends that might harm the deal, such as a significant portion of sales going to three or fewer customers. This would pose a risk for your buyer as it indicates a strong relationship between said customers and you.
In such a scenario, detaching yourself from the sales process may be the key to sealing the most profitable deal of your life. Besides, a larger potential buyers’ base will only increase your chances of finding one.