Tips on Preparing Your Business for Sale

Executive Summary

Congratulations on the decision to sell your business. As with any complex multistep process, you should begin at the beginning — starting with preparation.

Preparation makes execution look effortless. Considering that the sale of your business will likely be the largest sale you will ever make in business, it is foolish to neglect preparation.

Unfortunately, only a small proportion of business owners plan their exits by giving this major life decision the thought and attention it deserves. Why? Most entrepreneurs have a strong bias toward action. Once they have decided on a course of action, they prefer to dive right in and figure things out later.

You must realize, however, that a lack of preparation will extend the time frame of the sale, reduce the cash you put in your pocket, and lower the chances of a successful transaction.

Every exit is different, and each exit must be planned. There is no templated process you can follow to prepare your business for sale. The preparation stage involves reviewing a number of steps, prioritizing those steps, and then taking action on those steps.

Regardless of your position, be forthright with us regarding how much time you can spend preparing your business for sale.

If you are not willing or able to spend time preparing your business for sale, say so. We are accustomed to selling businesses in urgent situations or when circumstances are far from ideal. We welcome a business owner who is above board with us regarding how much time they can invest in preparing for the sale process.

The important thing is to be honest with us regarding your expectations, the condition of your business, and your level of preparation. We will eventually learn a lot about you and the state of your business, so it is best to be upfront from the get-go to maintain a relationship based on trust throughout the process. Maintaining trust with your advisors is key to ensuring the transaction is a successful one.

Make Millions by Making Yourself Replaceable

If you own a business, don’t make it difficult for a successor to replace you. The more valuable you are to the business, the less valuable your business will be to potential buyers. The ideal situation is one in which you are 100% replaceable.

Unfortunately, many business owners try to make themselves irreplaceable. Remember that making yourself irreplaceable not only decreases the value of your business but also makes it much more difficult to find a buyer for your business when it comes time to sell your company.

The easiest businesses to sell have a wide realm of target buyers can be relocated anywhere in the U.S., and do not require their operators to have highly specialized skill sets.

Imagine you are selling your business, and the buyer must have highly specialized or unique skills to operate your business. Imagine also that only 1 in 1,000 have this unique combination of skills, abilities, and talents. How hard do you think it would be to find and persuade this person to buy your business?

If the skills needed to operate your business are not easily found in groups of people, who can be readily identified and targeted, selling your business will be much more challenging. If running your business requires a rare blend of soft skills or personal attributes, finding a buyer will be more difficult. Hard skills are simpler to target because most types of people who possess these skills have already been classified in some form — for example, engineers would be easy to target through trade publications.

For this reason, absentee-owned businesses are worth much more than owner-operated businesses. Most absentee-owned businesses are successfully run by a team of core employees or a management team. If we can assume the employees will stay after the sale, nearly anyone is qualified to purchase the business from an operational standpoint.

As you streamline your business and make yourself replaceable, you will build a business that is much easier to sell. To streamline your business, you have to:

• Build a strong team of core employees or management team.
• Build systems into your business and document your operations.
• Automate processes in your business using technology or other systems.

These methods of streamlining your business involve using either human talent or technology. However, don’t make the mistake of trying to rely solely on either people or technology. Most businesses must use both.