How Do You Prepare Your Business For Sale?
If you have finally made the difficult decision to sell your business, it’s time to get down to work to prepare it for sale. Most business owners are in a rush to get done with the sale. However, this lack of preparation can hurt the valuation and deny you good value.
After so much hard work to build the enterprise, you deserve the best value out of this investment. A good exit plan can last months or years to guarantee a smooth sale and the best price. Estimates show that it can take 1 to 2 years to prepare a business for sale fully.
Poor planning can have devastating consequences for your investment. Many entrepreneurs take suboptimal sale price and sell their companies in unfavorable conditions due to lack of preparation. Without a good exit plan, you can lose your business if you have to sell in a hurry, yet there are no buyers.
Our advice to business owners or shareholders seeking to sell their companies is to create a comprehensive exit strategy. We help business owners craft a detailed plan for a smooth exit and most value for their enterprises. Planning your exit early removes the hassle from the process and helps make the business attractive to buyers.
Here are some of the steps we recommend for our clients to get the most out of the business sale.
1. Business Valuation
Valuation of a company is among the first steps the owners should do. It gives the seller a realistic and objective view of how much the business is worth. Working with an experienced broker is critical to get the best assessment.
These professionals have the right tools and understand how to do a business valuation using different methods. Some of the methods used include:
- Market value business valuation formula
- Multiple of earnings valuation method
- Book value method
- Capitalization of earnings valuation method
- The asset-based business valuation method
- The discounted cash flow (DCF) valuation method
- Liquidation value asset-based approach
- The ROI-based business valuation method
These business valuation methods are preferable in different scenarios. Your broker determines which is best for your company. With a valuation, you can start gauging buyer offers and know what to expect from the sale.
2. Prepare Your Paperwork
When selling a business, the first thing buyers want to look at it the paperwork. Your business broker also wants to have a look at the paperwork for the valuation. Some of the records you should have in place include:
- Operation documents: Prepare the business plan and history, stock inventory lists, supplier details, strategy plan, marketing plans, procedure and process documents, and other important documents.
- Financial records: Buyers want to see profit and loss statements, tax returns, and list of assets, Current balance sheet, Cash flow statement, forecast financials, bank loans, and an outgoing cost breakdown.
- Legal documents: These include employee contracts, franchise agreements, health and safety guidelines, and leases.
- Commercial records: Copy of the current lease, insurance policies, professional certificates, supplier accounts, and registration papers.
- Non-disclosure/confidentiality agreement
- Executive summary of an overview of the business
Preparing these documents and updating them is not easy, and you need professional expertise for this. It is part of the exit planning that our team helps clients with. We help you prepare all these documents to make the best first impression.
3. Prepare a Growth Plan
One of the key value drivers when selling a business is the growth potential. Buyers aren’t interested in the past or the present state of your business but the future. One tactic in preparing the business sale is to help buyers see value in your venture.
Draw a roadmap to opportunities the buyer could explore with more investment. We help you provide a picture of potential growth opportunities achievable through more capital injection. If you already have a marketing structure that consistently delivers results, assures the buyer of the viability of the venture.
4. Showcase the Value
Closely related with the growth opportunity is the value of your business. Take time to figure out and demonstrate the real value you’ve built into the business. The idea is to show the buyer why they should take the risk with your company.
You have to show the buyer that this is a solid investment. The buyer wants to see what they’re getting for their money. Now that you know your enterprise best prepare as much information for buyers as possible. This information highlights the attractiveness of your company. It also illustrates the value of any potential new owners.
5. Establish Advisor Relationships Early
Trying to control the sale process is the biggest blunder an entrepreneur can make. While you hold this investment close to heart, this is the time to let go and let professionals do the job. The exit process requires a unique skill set and relevant M&A experience.
For a smooth exit and best value, establish a relationship with your broker early enough. Early consultations allow the advisor to learn as much as they can about your business. With this insight and knowledge, your advisor can craft the best exit plan for your business.
6. Tackle the Operations
One of the things buyers look for in a new business is continuity. Can the company continue running after your exit? Prepare your business for the transition by investing in a skilled team of professionals. Develop a good management structure in the 1st and 2nd tiers to ensure the company runs smoothly.
Other operational considerations include streamlining the products/services and an effective marketing and sales process. A detailed operational control procedures manual is also valuable to the buyer.
7. Diversity the Customer Base
A good business shouldn’t rely on a single customer account. This is a risky position for your company to be in, and it can put off buyers. When preparing the business sale, invest in customer base expansion through targeted marketing.
These are a few of the tasks we undertake when preparing your business for sale. We develop custom exit strategies to suit unique clients’ needs. If you are thinking of selling your company, get in touch today and let’s work to draw the best exit plan.
Let’s hop on a quick call to discuss the timing and prospects of an exit based on your goals and the current state of your business. Schedule your free exit consultation today.
You're guaranteed to come away from the call with:
Clarity about your business
Knowledge of the landscape
A high-level exit plan
A rough valuation
Specific next steps
What our clients say
In my career you get to deal with a lot of service providers. There are the below average, the average the the above average. Then there is one category that no one talks about which is the exception. We engaged Hello Exit to source acquisition targets for us. The communication, personal service, attention to details, availability, interaction with the team has been nothing short of exceptional. If ANYONE wants further in-depth conversation about the exceptional experience please reach out.
I worked with Hello Exit for the sale of a business and everything went smoothly. The team was very hands-on and provided a lot of guidance throughout every part of the process. They took the time to get to know my business well and were able to communicate our operation effectively to potential buyers. The sale was a success and I couldn’t have done it without them.
Hello Exit was great working with me to help sell my software company. They made everything clear, were patient, never over pressured me, but kept a strong sense of urgency. I would recommend Hello Exit to anyone looking to sell their business and plan on working with them again in any capacity that I can.
The team Hello Exit is simply incredible! Their expertise and support throughout the entire process of selling my company were a game changer. Their expertise and guidance throughout the entire process was invaluable. They took the time to truly understand my needs and goals, and helped me navigate every step of the way with ease. Hello Exit is exceptional, and they truly go above and beyond to ensure their clients are not only satisfied, but actually excited about their exit!! I cannot recommend Hello Exit enough! Their professionalism, knowledge, and dedication to their clients are unmatched. If you’re looking for a top-notch company to help you sell your business, look no further than Hello Exit. Thank you guys, for all that you do!
It was a pleasure working with Hello Exit and they have my most sincere recommendation. They bring a sophistication and etiquette that is very hard to find in the lower, lower middle market – outstanding preparation, excellent sell-side coaching, a rationale / unbiased disposition, and so on. In addition, they bring a powerful network to the conversation and can add value well beyond the transaction. I hope to work with Hello Exit on many more deals to come!
Hello Exit added tremendous value for our portfolio of companies. They made a complex sale process easier and significantly more efficient. We received 5 offers (two above ask) and were extremely happy with the outcome. As a serial trouble maker that has acquired 7 companies and sold 4 we will be using Hello Exit for future exits.
Hello Exit has built one of the best online business brokerages out there. As a buyer, the company has continuously provided us with acquisition targets that have been very well qualified. Every opportunity has fit directly into the criteria we’ve been looking for which has saved a ton of time on due diligence. If you want to get a jump start on your acquisition pipeline, it’s easy to recommend Hello Exit.
Hello Exit is one of the most knowledgeable business brokerages out there for tech & web businesses. We used they to buy a significant business operated by 15+ employees. Our work in diligence was substantially reduced given the strong & accurate information package he provided. All questions were proactively answered, all supporting data was there and presented in the right format, and everything was accurately represented. This saved us weeks of work! In discussions & negotiations, they played a fair role & helped resolve issues by understanding the issue from the perspective of both buyer & seller. With their knowledge and experience, they were able to make smart suggestions and helped everyone reach a common ground quickly. I would surely work with Hello Exit again. They are super!
What can I say other than Hello Exit delivered on everything they promised… and then some. At first, I didn’t believe it when they said he would sell my agency in a few months. But they were so passionate about working together, a part of me believed they would deliver. And they did. We had 3 offers in 30 days and went under contract with the highest offer. 3 months later we closed on the sale at the price they evaluated us on. During the entire process, their knowledge and experience helped immensely. Any time there was confusion or a hurdle that myself or the buyer had, the team stepped in and smoothed every over. Selling a business is one of the most invigorating yet stressful experience I’ve ever went through and I’m so grateful that I picked the right broker to help me through it. I’d use Hello Exit again in a heartbeat.
The Hello Exit team was great to work with. They helped increase our deal flow with strategic deals. If someone is looking to increase their targeted deal flow I would definitely recommend working with Hello Exit.
Hello Exit was awesome to work with on the deal. They provided great support and advice all through – from initial interest discussions, negotiations, contract closure to execution. They’re very prompt and proactive which sails the deal making through. They also provided great support and mediation help post transition on some key contract payout clauses, which is highly appreciated. I recommend Hello Exit highly to SaaS business owners and entrepreneurs.
I’ve known Dustin (Hello Exit’s Founder) for over 10 years, and actually acquired a SaaS company he founded. I’ve always found Dustin to be extremely sharp, fair and honest, reasonable to deal with, and the kind of person you would want to do business with again in the future (which is rare these days). I’m currently mentoring and incubating over 150 international startup companies, and have already talked with Dustin about bringing Hello Exit into these businesses to broker the exit once they are profitable and solidly into their momentum phase.
Hello Exit is one of the best and most trustworthy SaaS advisories and brokerages in the industry! If you run a SaaS business, and Hello Exit contacts you, you should definitely talk to them! Even if you decide not to sell, it will be a very worthwhile and fruitful conversation.