Preparing Your Business for Sale
If you are planning a future sale of your business, it’s essential that you make the company attractive to potential buyers. This checklist covers ten critical areas to examine when planning a future sale:
1. Financial Statements
Are your financial statements and records accurate and reliable? Would a buyer have confidence in them? Do they reveal a business that is growing or one that is stagnant or declining? Do you understand the statements and are able to identify and act when they reveal problems that need to be addressed?
2. Working Capital Requirements.
Do your customers pay on time? Do you have an abnormal bad debt history? Do you get behind in paying your suppliers? Do you have any problem debts or liabilities? A buyer does not want to see abnormally high debt or working capital requirements.
3. Potential For Expansion.
Do you have unused operational capacity? Is your business easily scalable? Are there additional markets you could exploit? Buyers will be attracted to businesses that are easily expandable.
4. Client Base.
Is your client base diversified or do you rely on a few key clients? How easily could you transfer your referral network to a new owner? Buyers will be concerned about the financial impact of losing key clients, post-sale. You should aim for a well-diversified client base that is easily transferable.
5. Management Dependence.
Is your business heavily dependent on you? How dependent is the business on a few key employees? Do you have a succession plan in place? The greater the dependence on you or a few key employees, the greater the risk of problems developing post-sale.
6. Operations.
Are your operational processes efficient and properly documented? Are you using financial management and project management software effectively? Do you have equipment or inventory that is under or not utilized? Is so, consider disposing of these assets. Are your risks and assets appropriately insured? Efficient operations will improve the bottom line and the purchase price.
7. Reputation.
How solid is your company's reputation? Will it be reduced if existing ownership and/or management is replaced? Reputation is the bedrock on which the value of a company’s salable goodwill is based.
8. Legal.
Are your licenses, permits and certifications current and up to date? Are your critical leases and contracts of a reasonable term and transferable to a new owner? Do you have any legal issues that would be of concern to a buyer? Legal problems can easily derail a sale.
9. Taxes.
Have you developed a plan to minimize the taxes that will be payable on sale?
10. Future Lifestyle.
Do you have a realistic idea of what your business is worth? Are the expected net proceeds from the sale sufficient to fund your post-sale plans, eg retirement?
Are you a construction industry entrepreneur looking to achieve the highest possible selling price for your business? Chris Goodburn’s new book, Maximizing Business Value Construction Companies, is your step-by-step guide to navigating the entire sales process, from preparing your business for sale to closing the deal. Written in a concise, easy-to-read format, it's packed with tips and expert advice to help you maximize the value of your business.