Most entrepreneurs who plan to sell when exiting their business don’t think about it seriously until they are ready to sell. If you want to get the most out of your sale, you should start preparing long before you make a deal.

The sales process can take as long as 12 months. If you’re unprepared, this process can take even longer or you could have a difficult time concluding the sale, and preparing your business for sale can take as long as 10 years. Most of our clients come to us at the last minute, which makes it difficult for the business owner to get the best possible price or ensure the business will survive after they have left.

Understanding what the buyer is looking for and taking steps to make necessary improvements well before you start the sales process will give you leverage in negotiations. It will also ensure the buyer and your employees are equipped to continue your legacy. There is a lot of work to maximize the value of a business and ensure its sustainability. Even if a family member or manager wants to take on the business, getting the business ready for sale gives you additional options if plan A falls through. If you start preparing to sell now, you will be ready if you receive an unsolicited offer or there is a sudden change in priorities due to health, family situation or burnout. In light of that, here are some key considerations to keep in mind when preparing to sell your business.

1. Understand your priorities

It can be a challenge to look a few years into the future when you’re busy running the day-to-day of your business. Taking time each year to think about priorities, goals and next steps will ensure that you take the right actions to get the most out of your sale. First, you need to sort through your objectives and determine what you want to get out of the process. (1) What comes after your sale? Do you retire, stay on as an employee or start a new company? (2) What are your priorities? Are you most concerned with looking after employees, customers and suppliers, maximizing the total value of the business or maximizing the after-tax cash received?

2. Develop business and financial plans

A buyer will want to know your business is resilient and will survive once you are gone. What are the strategic initiatives for the business? What is its competitive advantage? You will need a business plan and a financial plan that projects anticipated financial results for the future. A buyer will also want to see that your financial statements have been audited or reviewed. If you can demonstrate a history of growth resulting from well-laid plans, the buyer will have more confidence that the business will drive the results they’re looking for. Long before you’re ready to sell, be sure to work with an expert to build annual plans and reporting processes.

3. Develop a succession plan

Your business has grown under your leadership, but are there other leaders within the business who can step into your shoes? Will the company be able to retain key employees? You need to prepare your management team and the rest of the organization for your departure. By creating a succession plan early, you can identify any gaps and hire or train the right management team to lead the company into the future. Protect your employees (and the buyer) from a potential disaster after you leave by creating a retention plan. A strong succession and retention plan is also essential for ensuring the business can survive if an unforeseen event (such as a serious illness) occurs.

4. Secure your customers and suppliers

A big fear for any buyer is that key customers or suppliers will leave as soon as you’re gone. You can start preparing for your sale well in advance by putting long-term contracts in place for those key relationships. However, some contracts with customers, suppliers, landlords and licence providers may have change of control or consent requirements. These contracts need to be identified and addressed before you start the process of selling your company.

5. Secure your intellectual property

Before buying your business, the buyer will want to know your intellectual property (IP) is secure. If there are any gaps in protecting your IP through patents, copyrights and trademarks, get started early because this will take time.

6. Update premises, equipment and inventory

Entrepreneurs can thrive in chaos, but a buyer won’t feel confident about a smooth transition if your premises are messy or full of outdated equipment and inventory. If you want your business to be ready for sale, you need a process for handling outdated or slow-moving inventory. Also, make a habit of disposing of outdated, redundant or obsolete equipment.

7. Get your documentation in order

Similar to your premises, a buyer will want to see that your documentation is in order. Organizing your files will demonstrate to potential buyers that they’ll be able to find key contracts and records. If you aren’t organized now, it can take some time to create and implement a document management system.

8. Document your processes

You may be able to run your company like a well-oiled machine, but could someone else? The new owner will want to know there are documented processes in place to ensure a smooth transition. It can be a big project requiring significant energy and resources to identify the company’s processes and document them effectively. Start well in advance of selling your company.

9. Resolve legal problems, improve public relations

Any buyer will want to reduce the amount of risk involved with taking over the company. If the company is not compliant with its regulatory and environmental requirements, its value will be reduced. If the company is (or has been) involved in any litigation, buyers will see a level of risk that could reduce your potential purchase price. Similarly, if the company has received negative media attention, this could cause a potential buyer to hesitate. Long before you start the selling process, you need to take steps to comply with regulatory and environmental requirements, resolve any litigation and develop strong public relations.

Michael Rose, B.Math, MBA, has over 35 years of experience helping businesses with sales, systems development, finance, risk management and team leadership. He specializes in mergers and acquisitions, end-user computing solutions and supporting ESL professionals as they develop their communications skills.

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