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SELLING A BUSINESS

Preparing Your Pre-Sale To-Do List

Creating a to-do list before you sell can help you create a clear plan for improvements to your business before you put it on the market.
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The minute you decide to sell your business, you have two choices. You can proceed immediately, offering it for sale in its current condition, realizing you may need to make price concessions to account for unaddressed weaknesses. Or you can delay your sale offering until you've invested the effort and funds necessary to overcome its weaknesses and improve its attractiveness to prospective buyers.

Your answer will depend entirely on your personal motivations and sales objectives. But if you have the time and want to improve the offers you receive, putting together a pre-sale to-do list is a must. Here’s how to get started:

Step 1. Flag the areas of your business in need of pre-sale improvement.

Buyers prefer small businesses that come with low risks and high rewards. The following chart lists aspects of your business that buyers will evaluate when considering it for a possible purchase. For each aspect, check whether your business condition is strong, adequate, or in need of improvement.

•    Aspects of your business that are in good condition will contribute to a stronger offering and likely a higher price.
•    Adequacies will contribute to an average-to-below-average price.
•    Areas in need of improvement will likely force you to offer price concessions unless they are offset by considerable strengths in areas of greater importance to the ongoing success of your business.

 

 

 

LEGAL CONDITIONS

Good

Average

Poor

Clear ownership of assets

Good

Average

Poor

Long-term, transferable leases

Good

Average

Poor

No liens/claims/encumbrances

Good

Average

Poor

No pending litigation/labor issues/law violations

Good

Average

Poor

Up-to-date licenses

Good

Average

Poor

No zoning issue

 

 

 

FINANCIAL CONDITIONS

Good

Average

Poor

Increasing revenues

Good

Average

Poor

Increasing profits

Good

Average

Poor

Positive cash flow

Good

Average

Poor

Taxes paid to date

Good

Average

Poor

Current debt payments

Good

Average

Poor

Current receivables

Good

Average

Poor

Professional produced financial statements

 

 

 

 

BUSINESS IMAGE

Good

Average

Poor

Trademarked name

Good

Average

Poor

Reputable image

Good

Average

Poor

Quality advertising

Good

Average

Poor

Website/online presence

Good

Average

Poor

Business location and interior

Good

Average

Poor

Signage

Good

Average

Poor

Publicity offline and online

Good

Average

Poor

Networks/associations

Good

Average

Poor

Word of mouth

 

 

 

 

BUSINESS OPERATIONS & ORGANIZATION

Good

Average

Poor

Equipment

Good

Average

Poor

Established, trained staff

Good

Average

Poor

Well-documented operations and systems

Good

Average

Poor

Profitable business model

Good

Average

Poor

Key employees with transferable employment contracts

 

 

 

PRODUCTS

Good

Average

Poor

Distinct, competitive products

Good

Average

Poor

Distinct, competitive services

Good

Average

Poor

Packaging/product presentation

Good

Average

Poor

Proprietary production process

 

 

 

 

CLIENTELE

Good

Average

Poor

Long-term, frequent customers

Good

Average

Poor

Long-term client contracts

Good

Average

Poor

Many vs. a customers

Good

Average

Poor

Loyal clientele

 

 

 

 

TRANSFERABILITY

Good

Average

Poor

Easy-to-transfer clientele

Good

Average

Poor

Easy-to-adopt systems

Good

Average

Poor

Long-term, transferable leases

Step 2. Commit to a pre-sale improvement action plan.

Using the Step 1 chart, study each aspect of your business that you indicated needs improvement. If you also answer "yes" to the following four questions the weakness should become a target of your pre-sale improvement plan:

Yes No

Is the weakness in an area of high importance to the success of your business?

Is the weakness likely to lessen a buyer's interest or affect the price a buyer is likely to offer?

Is the cost of improving the condition likely less than the price concession the weakness is likely to force?

Can you implement necessary changes within the timeframe of your sale goal?

Step 3. Create your pre-sale improvement plan.

Create an action plan for each weakness you intend to overcome. Include:

  • The necessary steps you commit to take.
  • The timeline you'll follow.
  • The resources you'll commit to the effort.
  • How you'll assign tasks in order to complete improvements by the time you intend to launch the marketing of your business for sale.

Step 4. As you strengthen your business for presentation to buyers, keep your sale plans as quiet as possible.

Share your sale intentions with key staff and outside consultants only as necessary and only when the news is accompanied by a non-disclosure or confidentiality agreement. Even when working with your financial and legal advisors, whose professional relationships are committed to confidentiality, stress the importance of keeping your sale intentions private. Should word get out that you plan to sell your business you risk creating uncertainty among employees, customers and suppliers, which can devalue your business at the same time you most need to increase its worth.

In next week’s installment of “Selling Your Small Business” we’ll help you put together the documentation necessary for a sale.   

Editor’s Note: This article is the sixth piece in a series taken from BizBuySell.com’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each Wednesday, Inc.com will publish a new section of the guide outlining BizBuySell.com’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.

Last updated: Apr 18, 2012

MIKE HANDELSMAN | BizBuySell.com

Mike Handelsman is group general manager for BizBuySell.com and BizQuest.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces.




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