Here’s your Checklist for Selling this Fall
If you’re getting close to putting your company on the market, there are some steps you can be taking to increase the value of your business for a potential buyer. Here’s how to make the months before you sell count.
Review your books and clean up anything that might concern a buyer.
Take personal expenses off the books: vehicles that aren’t for business use; perks and benefits for family members, and other one-off expenditures that a buyer won’t want to incur. Most owners try to minimize their tax exposure, but this is the time to add any income you can to the company’s bottom line. Any increase in Seller’s Discretionary Earnings (SDE) will boost the value of your company and attract more and better-quality buyers.
If you have family in the business, make sure their salaries are close to market rates and that they understand that a new buyer will be treating them as they will any other employee. They may need to adjust their expectations and get ready to welcome the new ownership team.
You’ll want to get all your financial data organized, make sure the statements are clear and accurate, and get copies of your last 3 -5 tax returns. Getting your paperwork ready in advance will save you time and energy during the due diligence process.
Think hard about making large expenditures.
If you have to replace a vehicle or piece of equipment, you’ll need to buy it, of course. But if you’re considering an optional purchase, it probably won’t pay for itself before the sale. It’s fine to let the new owner make the decision about the purchase.
Rev up your revenue, if possible.
This is a critical time for your business. Buyers will look at the last 3 -5 years of revenue, but they’ll also want to know that the business is still growing. Many owners who are ready to retire or are simply burned out take their foot off the gas, especially once they’ve made the decision to put the company on the market. This can lead to problems before closing Think of it this way: if you sell your business for a 3X multiple, you’ll earn 3X the value of every maintenance agreement you sell now.
This is a good time to make sure your operation is as efficient and profitable as possible. The energy you put into growing your customer base, training employees, and maximizing efficiency will make your company a more attractive prospect. You may attract more than one buyer, which will result in a higher offer – a good return on your investment.
Solicit online reviews and clean up any negative reviews or feedback.
One thing buyers look at as they consider a company is its online reputation. I’ve written about the power of positive reviews. Almost literally, the first thing a potential buyer will do is google your company’s name. What comes up in the search is your company’s first impression, for better or worse. Smart buyers know that they’re seeing not only what actual customers have to say, but what potential customers are looking for. More than 60% of customers check Google reviews online before they visit a business.
Ask your happiest customers for online reviews, and check to see if there are any negative ones you can resolve. As part of your investment in your company, ask staff to reach out to customers who had a less-than-perfect experience and make it right to the best of your ability.
Reviews can help a prospective buyer get insight into a company. The buyer will be able to get a clear picture of what the company does best (don’t mess it up) and what could be improved under new management.
Setting a firm date for selling your company can be energizing – you may get a second wind that you can use to make your business better and earn you more to fund the next step in your life.