5 Little Changes That Make a Big Difference

Posted on May 1, 2018

Here is a list of five little details to get right before you put your business on the market:

1.  Find your lease. If you rent space, you will be required to notify your landlord in order to sell your company, and assign your lease obligations to the buyer. Read through the fine print and ensure you’re not scrambling at the last minute to seek permission from your landlord to sell.

 

2.  Professionalize your books. Consider having audited financial statements prepared to give a buyer confidence in your bookkeeping.

 

3.  Stop using your company as an ATM.  Many business owners run trips and other perks through their business, but if you’re planning to sell, these treats will artificially depress your earnings, which will reduce the value of your company in the eyes of a buyer by much more than the value of the perks.

 

4.  Protect your gross margin. Oftentimes, when leading up to being listed for sale, companies grow by chasing low-margin business. You tell yourself you need top-line growth, but when an acquirer sees your growth has come at the expense of your gross margin, they will question your pricing authority and assume your journey to the bottom of the commoditization heap has begun.

 

5.  If you’re lucky enough to have formal contracts with your customers, make sure your customer contracts include a “survivor clause” stipulating that the obligations of the contract “survive” the change of ownership of your company. That way, your customers can’t use the sale of your company to wiggle out of their commitments to your business. Have a lawyer paper the language to ensure it has teeth in your jurisdiction.

And….

6.  Hire a qualified broker. Take a few minutes to complete our company Statement of Information, to locate the key markers used to evaluate a business, and identify any gaps you need to fill before taking your business to market.

Like competing in the Olympics, selling a business can be an all-or-nothing affair. Get it right and you will walk away a winner. Fumble your preparation, and you could end up out of the medals.