Preparing for Sale
Successfully selling your very small business takes planning and preparation.
Preparing Your Business For Sale
Once you make the decision to sell your business, you will need to get your business ready for sale.
Selling a business is quite a process and preparation is key. You will need to:
- Ensure that your financial statements are available and in a user friendly format.
- Gather all the documents and accounts you will need to transfer to your buyer and for due diligence.
- Prepare your space – tidy the physical and online spaces.
- Determine who will sell your business – you or a business broker?
- Create a valuation for your business.
- Decide on the legal structure of your sale – asset sale or entity sale.
- Prepare engaging sales materials that tell the story of your business.
- Prepare an advertisement that will attract buyers to your sales materials.
- Find an attorney who can help you with your Purchase Agreement.
More Information on Preparing for Your Sale
In order to sell your business, you will need 3 years of financial records. Specifically, you will need 3 years of P&L statements. The categories need to be easy to understand and the documents must be readable. Cash flow & balance sheets are important as well (especially if you use accrual accounting). Your tax returns are a useful verification tool but they are not the financial statements that buyers need.
As you prepare for your business sale, gather everything you will need to complete the transaction and to verify the business information you give to your buyer. You will want to create a list of accounts, passwords, contracts - all of the things that they will need to run the business. For verification, you'll want to gather everything that supports your sales, financials, or key metrics.
Valuing your very small business takes some work. There are dozens and dozens of factors that impact valuation (and read our blogs!). The financial state of your business, the role of the owner and the business assets and liabilities are all factors that influence value. Professional business valuation is almost universally beneficial for business sellers - starting your sale with the right value makes it easier to justify the price to potential buyers, makes marketing easier and streamlines the sales process.
Deciding who will sell your business for you is a very personal decision. Selling yourself works very well for business owners who are good at getting things done and confident in their ability to figure things out as they go. Self sellers also need to be comfortable talking about their business finances, responsive to buyer inquiries and (frankly) friendly enough to establish a rapport with potential buyers. We believe that many business owners are capable of successfully selling their own business. That said, sometimes is just a better fit.
Brokerage services are a better fit for sellers who do not have time to manage the sales process and want an expert to handle all aspects of the sale. Selling a business is a stressful process and there is absolutely something to be said for having a neutral 3rd party manage all the details.
The location of your small business impacts your sale planning. Selling does not happen in a bubble so the various regional trends will impact the market for your business sale. A successful sale in Orange, San Diego or Los Angeles county requires knowledge of the local market.