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Selling your business is likely one of your life’s most important financial events. Proper preparation leading up to the sale is crucial to maximizing the value you receive. As a business appraiser, I often see owners focus too much on minimizing taxes in the years before selling when they should be taking steps to maximize revenue and profits. Here are some key areas to focus on as you prepare to sell your business.

Streamline Operations

Take time in the 2-3 years before selling to streamline operations, cut unnecessary costs, and improve profit margins. Buyers will scrutinize your financial statements and will pay more for a tightly-run business with strong profits. Review your staffing levels and their performance, evaluate and optimize your inventory management, and eliminate unnecessary expenses. Implementing more efficient operations and technology now can improve productivity and lower costs. The higher your profits and margins, the higher valuation you can get for your business.

Goodwill and Reputation

You’ve built up goodwill and reputation over the years, but don’t take that for granted. In the lead-up to selling, focus on improving customer satisfaction, building relationships with key accounts, quickly resolving any outstanding customer complaints, and maintaining positive relations with vendors and distributors. You want to preserve the company’s good reputation so buyers can retain existing business. Make sure branding and marketing assets like your website and promotional materials are up-to-date.

Assemble Documents

Before you list your business for sale, gather the necessary documents a buyer will want during the due diligence phase. This includes current, detailed financial statements, tax returns, customer lists, contracts, leases, patents and trademarks, and employee records. Organizing this information ahead of time into a data room shows the business is prepared for sale and makes the process smoother.

In Summary

Selling your business is a significant event. Focus on maximizing value in the years leading up to the sale to get the best price and smoothly transition the business to new owners. With proper preparation, you can walk away with an optimal outcome when it comes time to sell your life’s work.