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It may be time for you to sell your business, but what do you need to do to prepare for that to happen? Whether you are selling now or in the future, there are many steps that you can take as a business owner to ensure that the sale of your company goes smoothly.

As a business owner, you should take steps every day to prepare for the sale of your company. Whether you are selling within the next year or five years, you should run your company with a sale in mind. Preparing your business for sale early on will help your company run smoother, and will make your business more appealing to buyers in the event that you do decide to sell. Here are some steps you can take:

  • Make yourself Redundant – You are selling a business, not yourself. Buyers want a business that can be successful after you exit, should you choose to do so. Find people you can trust to put in management positions and create internal controls that foster success within your company.
  • Recognize and Identify Strategic Buyers – Know your audience. There are certain buyers who are not seeking your profits, but rather your customer base, intellectual property, or other assets. There are certain steps you need to take to secure that property and make it easy to sell, so be sure you are aware of what buyers are after.
  • Settle any lawsuits – A business with unresolved legal issues looks less attractive to buyers. Cleaning up these issues ahead of time can increase your value at time of sale.
  • Offer a realistic and supportable forecast – Buyers will want insight into expected future earnings of your company. Providing a reliable forecast will demonstrate the strength of your management team and the overall quality of your company.
  • Focus on Profitability – Although certain deductions may be great for tax purposes, they won’t be as beneficial on your financial statements. Potential buyers are attracted to profits; consider managing your expenses in order to maintain a profitable position on your financial statements.
  • Protect the Positions of your Key Staff Members – The key employees of your company can provide a lot of value to the business you are selling. Make sure to take steps to retain them at your company or find a replacement for those positions should they leave before the sale is complete.
  • Get Out of the Office (get to know your clients) – Your clients can provide the best references as to the successful operations of your business. Ensure you have good relationships with them so when it comes time for the sale, they can provide a great reference.
  • Reach out to the Business Broker or Investment Banker – Although not necessary, a broker can be a valuable tool for the sale of your business. They can maintain a pool of potential buyers and can connect you with buyers who are looking to acquire exactly what you plan to sell.
  • Play Hard to Get – Create a demand for your company by speaking with multiple buyers. Competition among buyers usually means a higher sale price.
  • Keep it on the Down Low – Maintain a level of secrecy around the sale of your company. You risk losing key customers and employees if word about the sale of your business comes out too quickly.

A business merger or sale is a complex situation with many factors that may affect your tax situation. If you are considering one of these options, we advise that you contact an experienced tax advisor.  If you have any questions about this topic, or any other tax matters, please feel free to contact your L&B Professional at (858) 558-9200.

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