Getting the Business Ready for Sale
Once you have made the hard decision to sell your business, you need to ensure that your business can sell quickly once you begin the sale process. Owners of small to medium-size businesses are generally focused on the day-to-day profitability and continuity of the business. Most owners are opportunistic with regards to growth and continuity, very few spend dedicated time charting a growth/succession plan and ensuring that proper financial and operational processes and controls are in place. To get your business ready for sale you need to ensure:
Succession Planning – do you have a succession plan in place or a management team that possesses the necessary skills to run the business. A strategic buyer will have the management skill to take-over the business however a financial buyer will be more reliant on the owner or his management team for continuity. Just over half of business owners who plan to leave their company do not have any kind of succession plan, a 2011 survey by the Canadian Federation of Independent Business found. The consequences can be dire. Poor planning can mean a suboptimal sale price and unfavourable conditions, or even losing your company if you’re forced to sell in a hurry but no one wants to buy. That, in turn, can have a drastic impact on your retirement.
Bookkeeping – are your books managed by a professional accountant. It is preferred to have audited financial statements but at minimum, the financial statements should be “Review Engaged”. This is one of the key areas that a buyer will focus on as his valuation is based on the financial information you present. If these numbers do not stand-up during due diligence there often will be a price adjustment or break-down of the deal depending on the magnitude of financial misstatement.
Taxation – ensure you are current with your tax filing and any outstanding tax issues have been resolved.
Legal Agreement – compile all legal agreements that you/your company are a party too. Depending on the type of transaction, a buyer will be inheriting your agreements and will want to understand all financial and legal consequences related to the agreement.
Disclosure – any potential adverse issues should be disclosed at the outset to prevent any surprises during due diligence. Often if the issue is disclosed early, the parties can negotiate a plan to manage/resolve the issue.
Hire the Right Advisor to guide you with the Sale Process.
At Distinct Capital, we have been working with owners like you and we know what it takes to sell your business. We will help you get your business ready for sale.