How do you prepare your business for a smooth transition to the new owner?

This is one of the main reasons why you should always keep good records. If you find that your records are not clear and up to date, some fret. Look for a service such as QuickBooks or Bench.co to begin getting your financial updated so you can a crystal clear picture of your business finances.

In my experience, some business owners are happy to outsource the detailed financials, inventory and asset data and more to 3rd parties or to employees within the company. That's all fine. As a business owner you don't have to keep on top of the work BUT you do have to know what's going on. So create a reporting line and dashboard of metrics for your business that tells you immediately when something needs your attention.

Before you start on either of these first 2 points, there is a step that many business owners fail to take. That first step need to be working out how much you need to live your next life. So if your plan is to retire, how much cash does your business sale have to contribute towards your personal wealth in order to provide the standard of retirement you want? If your plan is to invest in something different, what investment figure do you need to have? Without knowing what the total financial purpose and goal is, you won't know if you're hitting that target, or if you've already exceeded it. Speak to your wealth advisor, pension provider or IFA as well as your Business Broker.

This is where a business broker starts earning their fee. They can take all of this work away from you so you concentrate on running the business. Don't underestimate the value a Business Broker can add in the sale process.

In the UK we produce Heads Of Terms rather than LOI, but they perform the same function. Conducting due diligence on the vendor is commonplace but it is equally important to conduct due diligence on the purchaser.

Among Sellers' key goals for a sales agreement should be 1) to clearly set forth what's being sold and what's excluded; 2) set clear timelines leading up to closing; 3) limit loopholes that buyer could exploit to get out of the deal; and 4) limit the risk for post-closing claims by the buyer. Get an experienced transactions attorney involved early to make sure your agreement is structured to achieve your goals.

From a buyer's persepctive, due diligence is key because it helps you make an informed decision to purchase. Having good terms in the sales agreement is very important but identifying and resolving potential issues during due diligence is far better and cheaper way to avoid costly suprises and mistakes post-closing. In addition, whether a seller can produce due diligence documents tells you a lot about how well the seller ran the business in the first place.

Make sure to use a Business Attorney to review all the legal documents, and don’t forget to take the advice of your CPA on how to breakdown the sale price of your business because there may be big tax implications for you.

Seek out the type of employee that you think could one day replace you, and then have a professional specialist design a special deferred compensation plan tailored to that one special talented individual that will attract him/her, and retain them for the long term. Also, think of that same specialist designing a key man program for you, the owner, and share that plan with your future replacement. this will also motivate him.her to stay with you.