3 Essential O’s To Selling Your Business

Selling a business is a significant milestone that requires careful planning and well thought out execution.

Whether you’re retiring, pursuing new ventures, or simply ready to move on, strategically preparing your business for sale can maximize your proceeds and ensure a smooth transition. Here are the three essential O’s to consider as you get ready to sell your business.

1. Objective Information

Many business owners wait too late to get the objective information they need to make the best decisions for their unique situations. Making assumptions about business value, and not understanding the financial dynamics of a business sale can prevent you from being financially ready to move onto the next adventures in your life.

Engage Professional Advisors that will provide you with objective information about your business value, and the financial implications of selling your business. Selling a business is complex and benefits from expert guidance by professionals with experience in buy/sell business transactions:

• Business Broker: Helps determine market value, markets the business, identifies qualified buyers, and negotiates terms.
• Legal Counsel: Ensures compliance with legal requirements and drafts sales agreements.
• Financial Advisor: Provides tax planning strategies to maximize after-tax proceeds.

2. Organized Financial Records

Prospective buyers and their lending partners will scrutinize the financial health of a business prior to purchase. Messy or outdated financial records turn interested buyers into skeptical buyers and may cause both buyers and their lenders to question the information you provide. Trust is a key element of a successful business sale and it’s critical to update and organize your financial records and be ready to answer questions regarding your financial statements.

• Up-to-Date and Accurate: profit and loss statement, balance sheets, cash flow statements, and financial projections. Buyers will also want to see tax returns for the past 3-5 years.
• Transparent: Be ready to speak to both the positives and negatives of your business financial health and the ups and downs of cash flow. Be transparent regarding revenue fluctuations, cost management dynamics, and debt obligations.
• Audited: If possible, have your financials audited by a reputable accounting firm for added credibility.

3. Optimized Business Operations

A well-run business is more attractive to buyers. Business operations can get messy over time and before selling it’s good to step back to assess those areas of your business you can feasibly optimize to enhance its appeal to buyers. Focus on:

• Streamlining Processes: Standardize operations and document procedures. Buyers appreciate and will pay more for businesses with turn-key operations.
• Transferable Management Structure: Ensure the business isn’t overly reliant on you - the owner(s).
• Customer and Supplier Relationships: Maintain strong, stable relationships that will continue post-sale. Assess your dependency on customers and suppliers to determine if your business is overly reliant on any one or a few key suppliers or customers. Over reliance can reduce your business value and by being proactive you can eliminate over reliance.
• Contracts and Agreements: Review and update leases, vendor contracts, employee agreements, and intellectual property rights.
• Regulatory Compliance: Ensure all licenses and permits are current.
• Pending Litigations: Resolve any legal disputes prior to selling your business.
• Website and SEO: Update your website, improve SEO, and showcase positive reviews.
• Data Analytics: Use data to demonstrate business performance, marketing results, customer behavior, and growth potential. Key operational metrics are indicators of business health and buyers are interested in the story your business numbers tell.

Selling a business is a complex process that demands preparation, diligence, and professional guidance. By focusing on these three essential O’s, you can be prepared for engaging with qualified buyers, negotiating deal terms and progressing through the due diligence process to secure a successful sale.