Seven Steps to Polish Up Your Business for Sale

Think about what your potential buyer might find more attractive and more valuable and be willing to pay more for.

October 27, 2021

No matter how much you love running your business, there’s a good chance that you’ll eventually want to stop doing so.  You might have made enough money that you can afford to kick back and relax, you might decide that it’s time to retire, or you might decide that there’s something new and interesting that you want to try your hand at.

When you decide that it’s time to exit your business, you might have to simply shut it down if it’s not a business that you can sell.  For example, personal services businesses can be difficult to sell.  But other businesses might be more marketable, and you might be able to cash out before you head for the exits.

But when you’re getting ready to sell your business, just like when you’re getting ready to sell a house, you’ll want to maximize the value that you can get out of it.  That means thinking about what your potential buyer might find more attractive and more valuable and be willing to pay more money for.

Here are seven things that you can do to polish up your business in the eyes of your potential buyer and increase the purchase price that you pocket.

1. Refresh Your Brand and Your Marketing

One of the first things that you should do when thinking about how to position your business for sale is think about the strength of your brand.  Think of this as being akin to the curbside appeal of a house that you’re trying to sell.  Your brand is how you present yourself to your customers, and your potential buyer cares an awful lot about how your customers perceive your business.  If customers don’t have a good opinion of your business, then a potential buyer won’t, either.

Think about your name, your logo, the colors, and the style that your brand presents to the world.  Some of these may be more difficult to change than others, but consider whether any of them could stand some updating.  Is your website a little out of date?  Do you really know your customer?  Are you advertising through channels that are calculated to reach your ideal customers?  Does your copy speak to their true buying motivations?

Go through this brain damage now and be able to articulate your reasoning for each of these decisions to your potential buyer.  The more thought out your marketing and branding strategies and the more traction they appear to have in the market, the more compelling an investment opportunity your potential buyer will likely find your business.

2. Document Your Processes

After you’ve thought about the external image that you present to the market, think about what goes on internally at your business.  The customer may not see how the sausage gets made, but how you make the sausage is really important.  Are there any problems in any of your processes?  Are there steps in any of your processes that could stand to be optimized?  Go through this exercise now and tighten up what you can so that you can reduce any unnecessary costs.

But as you think about these processes, document them by writing them down.  Your buyer wants to be able to run your business just as well as you and then improve upon your performance, and handing them well-documented processes helps them get up to speed faster.  If your potential buyer can come in and start running your business just as well as you right away because they understand all of the necessary processes involved, then they’ll generally be willing to pay a little more for your business.

At the other end of the spectrum, if you’re integral to the success of your business because you’re the only person who knows how every process works, then you’re going to get a lower price because value will vanish as soon as you leave.

3. Take Stock of Your Employees

Documented processes are great, but they don’t run themselves.  So after you’ve optimized and documented your internal processes, give some thought to your employees who are actually carrying them out.  Do you have any weak links in the chain?  Are they happy working for you?  Are there any bad apples who are holding everyone back and need to be replaced?  Take care of these issues now so that your potential buyer doesn’t have to.  Doing so adds some value that might justify a higher asking price of your potential buyer. 

4. Do a Tech Audit

When your employees are carrying out your business’s processes, they can only do so with the tools that you provide them.  These days, in lots of businesses, more and more of those tools are likely to be digital in nature.  Where do you use tech solutions in your business?  Think about everything from your website to your point-of-sale and payment systems, from payroll to IT security.  Could any of them stand to be updated?

But be clear-eyed about any new investments that you make in any tech or software solutions.  One new fancy tool isn’t always a good thing and isn’t always worth the cost.  For example, do you already use seventeen different software applications that your employees don’t really like and aren’t properly trained on?  If so, then that eighteen software application probably isn’t going to add a whole lot of value.  Look for ways to improve efficiency, and don’t overlook the possibility that simplifying your approach can also boost productivity.

5. Get Your Books in Order

All right, science class is over.  Now it’s time for math, so let’s look at the numbers.  When a potential buyer starts looking at your business, they’ll want to understand your business’s performance over the last several years, and since accounting is the language of business, one of the first things they’ll look at is your books.

If you haven’t been staying up on keeping your books in tip-top shape and producing your financial statements, then delaying it isn’t going to make the problem any better.  Call your accountant and set up a time to go through your books.  Your accountant can help you get things in order so that a potential buyer can make heads or tails of what he’s looking at. 

6. Consider Using a Business Broker

However good your business looks and however good it actually is, you can still get stuck with a bad deal.  How?  By going into a negotiation without any leverage.  You might leave a lot of money on the table.  Worse, if someone has leverage over you, then they can really extract a lot of value out of you.

So how do you maximize your leverage before you go into a negotiation to sell your business?  By developing your options.  The more people who are interested in buying your business, the harder the bargain you’ll be able to drive and the higher purchase price you’ll be able to realize.  A great way to do that is by working with a business broker.  Just like you might hire a realtor to help you sell your house, a business broker can help you list your business for sale and get your business in front of more potential buyers.

7. Talk to Your Lawyer

You knew that this part was coming sooner or later, right?  Well, here it is.  You’ll need to talk to a lawyer before you sell your business because you’ll need someone to put the legal agreements together.  And before your lawyer does that, he can talk you through all of the legal and tax consequences of selling your business.

This conversation is actually the perfect opportunity for your lawyer to pop the hood and see if there are any legal problems that you’ve overlooked.  Legal problems are risks that could materialize after you’ve sold your business, so your potential buyer will care a lot about them.  Anything they find that creates a risk that they might have to pay money to fix after the sale, and they might look to you to cover that cost, either through a reduced purchase price or through indemnification.  Talk to your lawyer early and often and think about how you can address the issues that he raises.