Preparing Your Business for Sale
If you’re a business owner getting ready to sell your business, conducting due diligence is crucial. It involves demonstrating the level of judgment, care, prudence, and activity that a reasonable person would typically exercise in such circumstances. This concept holds significance across various areas:
In general, it pertains to the expected level of care that any prudent individual would employ in a given scenario. For business deals, it’s up to company directors and officers to assess the risks at hand. For investors, it entails examining the risks associated with an investment. During negotiations, it’s about ensuring all parties understand each other’s expectations and abilities to meet the agreement.
Here’s What This Means for You When Selling Your Business:
- Evaluate Your Business: Take a look at your company through the eyes of a buyer. Address any concerns or questions proactively before they are raised by buyers. This preparation process might take anywhere from a year or more depending on how complex your business is.
- Financial Clarity: Maintain transparency in your records. While businesses often aim for tax deductions, these should be clearly identifiable in your accounts.
- Managing Accounts Receivable: Ensure that your accounts payable and accounts receivable aging reports are well maintained. Buyers might get worried if there are delays in receiving payments from clients.
- Ownership Clarity: Make sure that the legal ownership of your business is straightforward with no hidden partners involved.
- Keeping Contracts Updated: Double-check that all agreements with customers or suppliers are current and legally binding.
- Defined Staff Roles: Clearly outline the responsibilities and roles of your team members to showcase your business as structured to potential buyers.
- Training After Sale: Determine the involvement of owners in training the new buyer post-sale.
- Compliance with Regulations: Stay updated on tax and employment records. Be ready for any audits.
- Legal Matters Resolved: Settle any disputes as they can raise concerns for buyers and lenders.
- Valid Status: Ensure that your business licenses and official standing are current according to state and local regulations.
- Business Strategy Review: If you have a business plan, outline it to demonstrate its value to interested buyers. Detailed sharing can be done during diligence procedures.
Engaging a business broker can simplify this process by helping you position your business effectively for sale. They may offer tools, like staff questionnaires, to aid in organizing and presenting your business seamlessly.