Stage 6 of Business Success: Creating a Business for Sale

Your business may bring in millions. You may have lived a very good life, built on the profits from your enterprise. But sometimes, even the most successful organizations are hard to sell. However, there are things you can do to change that. When you’re getting your business ready to sell, you are in Stage 6 of Business Success. If you’ve completed Stages 1-5 of Small Business Success, you now have a high-value business that has all of its systems working. This means that your firm is now a reliable moneymaker that no longer requires personal passion and drive to continue to work.

The ways owners structure companies are at the heart of market value. Whether an owner has spent two years or a lifetime building a business, corporate structure, and a corporate track record determines what others are willing to pay.

What do Investors REALLY Buy?

We’ve all heard about investors buying a failing company and turning it around. And many of us know of successful, profitable organizations that simply can’t find a buyer. That’s because investors aren’t always laser-focused on a company that just makes money. At the top of most buyers’ lists are top management teams, sustainable systems, good locations, excellent distribution chains, strong customer relationships, strong P&Ls, or valuable equipment. Or all of the above.

Many business owners are tempted to make a lot of changes to ensure their companies look attractive to potential bidders. Redoing marketing materials, upgrading landscaping, or paving parking lots are all examples of surface-level cosmetic upgrades that make a firm more attractive to sellers. While owners can make small cosmetic tweaks when getting ready to put a company on the market to avoid significant shifts. Keep good people, strong systems, and all core competencies in place. These are the things that comprise the true value of a business, and these are the things that buyers value most.

Finessing the appearance of a firm is smart. When organizations clean up their marketing or enhance their real estate assets, it’s making improvements that add credibility to the company’s existing track record of success. However, this isn’t the time to mess with systems, controls, or key employees. 

Professional Valuations

Sometimes owners methodically plan to sell businesses. Other times, they are presented with surprise offers. For business owners who want to sell their enterprises, now or in 10 years, it’s wise to get professional valuations early on. A professional valuation should include an exhaustive analysis of your company, systems, assets, and the value of everything in inventory. A sound valuation will help companies identify issues and fix them in ways that increase the selling price. And it will also help owners recognize a good offer when it is unexpectedly presented.

Polish Your Financials. Polish Them HARD.

It’s common for a buyer to request a financial audit before completing the deal. That means they’re going to be looking at the books. Organized bookkeeping reflects well on a company. Disorganized accounting is a red flag. This means that owners MUST get all financial records into pristine shape before putting a business up for sale.

This is also the time to take steps to improve the company’s credit. Inventory financial liabilities and look for ways to reduce or even eliminate them. While these issues may not have impacted a firm's performance in the past, they will affect a buyer’s interest and the size of their offer.

Once the company’s books, accounting, and records are neat, complete, and well-organized, it’s easy for buyers to identify a strong P&L, plentiful credit, and minimal liabilities. And that’s attractive to any buyer.

Take the Time to Get it Right!

Listen, selling your business is a huge deal. In this stage, even small mistakes can cost you–literally cost you–big time. That’s why it’s so important to understand how to get your business ready for sale. And taking the time to get it right can increase your profits before you even start negotiations.

Want to learn more? Feel free to email me at [email protected] or leave a comment here, and I’ll reply.