An ounce of prevention is worth a pound of cure. It is important to prepare your company for sale well in advance of trying to sell it. What are the important steps you can take to get your company prepared to maximize your sales price:
You must know what the enterprise value of your business is. There are many methods to value a business including net asset value, discounted cash flow and market comparables. This will give you a good idea of what your company is worth so you can measure offers. However, do not convey this value to a buyer.
Most buyers will want to see your last 3 years of financial statements including balance sheets and income statements.
Most private business owners run all sorts of personal expenses through the business to suppress earnings and minimize taxes. Trips, travel, meals and entertainment, cars, family on payroll may all be added back in. The goal is to increase your earnings through recasting before showing your financials to a buyer.
Buyers are always curious as to why a seller wants to exit a business. Be prepared to explain this. Make sure all decision makers are motivated to sell.
Hire and M&A advisor to take you through the sales process, a tax advisor for minimizing your taxes after selling and a financial advisor to help you manage the liquidity created after selling. You will also need an attorney to review the purchase agreement and reps and warrants.
Have your M&A advisor prepare a “CIM” explaining your company and highlighting its most attractive features. This will be used to present your company to buyers in the most attractive way.
Don’t let your business performance decline. It is best to be negotiating the sale of your business in a position of strength.
