Preparing Your Business for Sale

Clean Up Financial Statements

Buyers and their lenders will scrutinize your financial statements. Take these steps to ensure they present your business in the best light:

• Ensure financial statements follow GAAP (Generally Accepted Accounting Principles)
• Consider having 3-5 years of financial statements reviewed or audited by a CPA
• Separate personal expenses from business expenses
• Document all add-backs and discretionary expenses
• Reconcile balance sheet accounts
• Clean up inventory and write off obsolete items

Improve Profitability

Since most businesses are valued as a multiple of earnings, increasing profitability directly impacts sale price:

• Review pricing strategies and increase where possible
• Identify and eliminate unprofitable products or services
• Renegotiate vendor contracts
• Optimize staffing levels
• Reduce owner-specific expenses that won't transfer to a new owner

Reduce Owner Dependence

Businesses that can operate without the owner are more valuable and marketable:

• Develop and document systems and processes
• Build a strong management team
• Delegate key client relationships
• Create an organizational chart showing clear roles and responsibilities
• Implement training programs for key positions

Address Facility Issues

• Make necessary repairs and cosmetic improvements
• Ensure compliance with safety regulations
• Review and extend lease agreements if applicable
• Address any environmental concerns
• Organize and clean the physical space

Organize Legal Documents

• Review and update corporate records
• Ensure all contracts are current and transferable
• Resolve any pending litigation or legal issues
• Update and document all intellectual property
• Review and update employee agreements

Address Tax Issues

• Ensure all tax filings are current and accurate
• Resolve any outstanding tax liabilities
• Consult with a tax advisor about sale structure to minimize tax impact
• Consider tax implications of different deal structures

Create a Virtual Data Room

Organize the following documents in a secure, digital format:

• 3-5 years of financial statements and tax returns
• Current year-to-date financials with prior year comparisons
• List of assets with documentation
• Customer and vendor contracts
• Employee information and organization chart
• Lease agreements and real estate documents
• Intellectual property documentation
• Marketing materials and business plans