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Selling your business is likely the largest financial transaction you will ever make. This is not the time to take short cuts, and it is critical use the same care and patience it took to grow and sustain your business.
What steps should be taken to prepare your company for sale?
1. Determine the company’s actual worth. There are many formulas for valuing a business. The sale price depends on such factors as sales, profits, business fundamentals, future prospects, client concentrations, and others. A third-party independent valuation is one of the most reliable methods of establishing a market value for your business.
2. Be sure your records are up to date. You want all your hard work to pay off in the sale, so be sure you have detailed financial and company records that provide an accurate assessment of the company’s financial position.
3. The staff is an important asset. The loss of key employees during a sale can kill a deal. Key employees may be crucial to the ongoing success of the company. Do everything possible to train and properly compensate your best personnel to ensure they will be motivated to work with a new owner.
4. Client diversification. Ensure that your client base is solidified and all contracts are up to date and renewed. If you have any clients who represent more than 10% of your business, now would be the time to add new clients, in order to minimize the potential impact that the loss of one large client could have on your business.
5. Assemble a team of experts. No matter how independent you are, the sale of a business is not something to handle on your own. A good team should consist of a business intermediary, transaction attorney, and accountant. The performance of the company during the time it is on the market is crucial, so working with a transaction team will allow you to focus on the ongoing operation of the company while the team handles the sale.
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