Get Your House in Order Before Selling a Business

(Newswire.net — June 30, 2020) Lehi, UTAH —

Anyone who has listed a home for sale has taken the necessary steps to make their house more appealing to a potential buyer by adding fresh paint, repairing anything that is broken, and sprucing up the outside. The same needs to be true when selling a business. Just like a house, preparing to sell a business starts long before it is put on the market. A business owner needs to look around and decide what needs to be cleaned up to make it more appealing to a buyer.

Does Your Business Have A CPA And A Business Attorney?

The first task should be to hire a CPA and a business attorney if the business hasn’t done so already.  Having a CPA monitoring and keeping the financials updated will be crucial when it comes to putting a value on the business.  A business attorney is necessary to ensure the legal entity is formed and maintained appropriately to avoid liability issues.  Then having a business attorney prepare applicable contracts and continually advise the business owner will protect the business from making costly legal mistakes.  

Dream Big, But Not Too Big With A Selling Price

Business owners are eager to declare a selling price that is usually way higher than what a buyer is willing to pay.  It’s important to stay realistic about the financials and the market when deciding what price to list the business for.  One way to come up with a reasonable price is to hire a business appraiser.  Just like a house appraiser, a business appraiser will perform a meticulous breakdown of the numbers to determine how much a business is worth.

Selling A Business Can’t Happen Overnight

A business owner can add significant value to the selling price by putting its “house in order” today. Dana Ball, a Utah small business attorney says, “Preparing to sell your business starts long before you put it on the market. Selling a business doesn’t happen overnight and there are many factors that will impact the outcome of the sale.”

Be Ready For A Buyer’s Due Diligence

Part of getting a business in order includes gathering all the documentation necessary for the due diligence phase of the sale. A potential buyer will look at the business from every angle, dig deeply into the day to day operations, and investigate all the financial information.

Start Preparing Today

It’s never too early to begin all the prep work before listing a business to sell. According to Debbie Allen in The Balance Small Business, the most common mistake in selling a business is missing a window of opportunity and not planning far enough in advance. It can take two to four years to sell a business which makes long term planning so critical. There are several things you can do early to position your company in the best possible way.

• ●     Make sure the business is profitable in a way that is attractive to a potential buyer. Consistency and growth over several years should be established.
• ●     Good relationships with customers should exist, all contracts need to be sound, and all processes and procedures documented.
• ●     There needs to be an effective team that will be able to make the transition smooth if the company is bought.

Have Documentation In Order

After looking at these factors, and a buyer likes what they see, the business will need to back up these claims with proper documentation. The documents needed now are extensive and complicated and cannot be done quickly. Some examples of what a business needs to show includes:

• ●     The organization and structure of the legal entity.
• ●     Financial information including audit reports for at least three years, accounts payable and receivable, general ledgers and credit reports, and projections including capital budgets and strategic plans.
• ●     A current list of all physical assets, intellectual property, and real estate
• ●     All tax filings and information from the past three years

Be Ready For Legal Fees To Get The Purchase Documents Prepared

Finally, buyers and sellers are shocked at the amount of legal work involved in preparing the purchase documents and negotiating the terms of the deal. Because buying or selling a business is a slow and methodical process it drives up legal fees. Dana Ball, a Utah small business attorney, recommends finding an attorney who will charge a flat rate fee instead of billing by the hour. Why? Because a set fee will save you money in the long run. It eliminates the surprise of getting a very large and unexpected bill after the sale has closed.

Business owners may have started their business with the intent to grow and sell in order to move on to the next business adventure or they get an offer they can’t refuse. Just like selling a home, selling a business is stressful so why not make the process easier on yourself by preparing early.  Whether you plan to sell your business in the next few months or the next few years, avoid scrambling to be ready for that buyer and figure out what you can do today.

(Newswire.net — June 25, 2020) Lehi, UTAH —