Preparing to Sell Your Business -
Summary - A 50-Point Action Plan

Preparing to Sell Your Business - Summary - A 50-Point Action Plan

In the last issue (#39), we discussed Preparing to Sell Your Business - Housekeeping. In this issue, Preparing to Sell Your Business - Summary - A 50-Point Action Plan, we will summarize the previous seven issues.

A Favorite Famous Quote
"A good plan today is better than a perfect
plan tomorrow."  George S. Patton

Preparing to Sell Your Business - Summary - A 50-Point Action Plan

Those seven newsletters contained a total of 50 action items which are summarized below:

The last seven issues of this newsletter series were devoted to preparing to sell your business.  Those seven newsletters contained a total of 50 action items which are summarized below:

Preparing to Sell Your Business - Planning Considerations (Issue #32)

• Learn the realistic value of your business - obtain an informal business valuation
• Learn the realistic value of your commercial real estate (if applicable) - obtain informal valuations
• Understand the reality of your existing personal financial situation
• Determine your ultimate transition goal (transition to a family member, co-owner, employee or third party)
• Estimate the timing of your desire to sell
• Project your future living/lifestyle expenses as well as future income

Preparing to Sell Your Business - Minimizing Buyers' Risk (Issue #33)

• Understand the need to have Seller's Discretionary Earnings (SDE) in excess of $100,000
• Understand the reasons it's best to have consistent and reliable SDE
• Understand the need to have key employees (second-level management)
• Understand the need to minimize customer concentration
• Understand the importance of reliable financial information
• Understand the business sale process (including the importance of confidentiality, non-compete agreements, the need to provide training, the need to consider seller financing and the need to address obstacles and disclose negative issues)

Preparing to Sell Your Business - Improving Accounting Procedures (Issue #34)

• Replace tax minimization policies with profitability maximization policies
• Eliminate cash-basis accounting and switch to accrual-basis accounting
• Stop running personal expenses through the business
• Stop skimming unreported cash transactions
• Stop recording capital asset acquisitions in expense accounts
• Stop understating inventory (which overstates costs of goods sold)
• Improve your inventory accounting system
• Track key business metrics on a monthly basis

Preparing to Sell Your Business - Improving Profitability (Issue #35)

• Increase your gross margin percentage
• Increase your sales and marketing efforts
• Develop (or improve) your website
• Consider marketing automation to significantly increase your revenues
• Identify opportunities to cut unnecessary costs
• Eliminate underperforming employees
• Collect on overdue accounts receivable
• Concentrate on your successful niche - discontinue unprofitable (or marginally profitable) services/products

Preparing to Sell Your Business - Systemize and Document Your Business Operations (Issue #36)

• Systemize and document your business operations (refer to the article for more details)
• Identify opportunities for increased efficiencies
• Develop second-level management to minimize your importance to success of the business

Preparing to Sell Your Business - Identifying Assets (Issue #37)

• Develop a list of assets and verify their existence
• Identify assets to be excluded for a sale of your business
• Learn the value of your commercial real estate (if applicable)
• Sell non-productive assets no longer used in the business
• Sell excess, old or obsolete inventory
• Identify and document intellectual and intangible assets such as patents, trademarks, copyrights and exclusive agreements

Preparing to Sell Your Business - Writing the Buyer's Business Plan (Issue #38)

• Develop the "sizzle that sells the steak" to streamline the sale process
• Concentrate your efforts on the qualitative aspects of the business plan
• Identify opportunities for growth and increased profitability
• Anticipate and answer due diligence questions within the business plan

Preparing to Sell Your Business - Housekeeping (Issue #39)

• Eliminate clutter in the business.  Try the "four-box" method
• Sell or discard non-productive assets and inventory
• Remove personal assets and mementos that will not be included in the sale
• Clean the facility (consider a comprehensive cleaning by a commercial cleaning company)
• Clean the restrooms and replace toilets and sinks (if applicable)
• Repair signs, replace lights and stained ceiling tiles
• Consider painting where necessary
• Clean up exterior landscaping (if applicable)
• Consider upgrading computers

The sooner you begin taking these action steps (many require 3 - 5 years), the greater the likelihood of selling your business at maximum valuation.  Don't wait, though.  It's never too early to start!  As a side benefit, many of these steps will result in more take home pay for you during the years you continue to own the business.

Another Favorite Famous Quote
Nothing is particularly hard if you divide
it into small jobs."  Henry Ford

Overcome the Power of Inertia

Overcome the Power of Inertia and call a business broker for a free consultation. Many brokers offer no-charge, no-obligation evaluations of small businesses. They can provide a broker opinion of value and help you identify obstacles to a successful sale as well as opportunities for improvement to increase the value of your business. That is a great way to start planning for a successful and profitable exit from your business.