If you are considering selling your business, the time couldn’t be better; it’s a seller’s market. Nevertheless, taking this step is not a cake walk. Be sure you understand why your company might not be attractive to buyers so that you can make the necessary corrections.
It’s All in Your Head
If you have poured your heart and soul into your company and been almost singlehandedly responsible for its birth, maintenance and growth, deciding to let it go can leave your enterprise appearing to have no one responsible to take the helm after you step away. Recruiting and cultivating a management team to impart the inner secrets of your business operations can ease the transition and make your enterprise look stable and sustainable even after you are long gone.
Lack of Attention to Details
In the flurry of your day-to-day business activities, paperwork may sometimes take a back seat. This can not only come back to haunt you at tax time but also when prospective buyers take a look at your records. If they see gaps or inconsistencies in your documentation, they will be wary about closing the deal. Take the time to organize and streamline your documents now, and you will put many fears to rest later.
Lawsuits are the Kiss of Death
Whether someone is suing you or you are going to court against another entity, buyers almost never want to get involved. They are understandably reluctant to spend money on a company that could end up at the wrong end of a legal decision. As hard as you might try, you cannot have absolute control over whether you are sued.
Accidents happen; mistakes occur and sometimes absolutely unfounded legal action is taken against you. This is why purchasing insurance for errors and omissions can be an excellent preemptive measure. Once it is in place, it will protect you and your employees against liability for negligent actions or inadequate work. While possessing this coverage is not an iron-clad guarantee, it goes a long way toward immunizing you against damaging lawsuits that can send prospective buyers running in the opposite direction.
Many companies do it: use their business to funnel personal expenses in order to save on taxes. This practice, known as normalizations, often is seen in the form of paying family members a salary for doing little or no work or writing off the cost of purchases or events as part of your company’s expenses. Not surprisingly, people thinking about buying you out don’t generally have positive feelings about normalizations. For that reason, do your best to minimize or eliminate normalizations as soon as you begin to seriously contemplate selling.
After you have a management staff who knows the ins and outs of your business as well as you do, after your documentation is in order, your insurance in hand and your expenses clarified and under control, you can finally consider putting your company on the market. Taking these preparatory steps will help to ensure that buyers feel confident in the viability and stability of your enterprise even after you have moved out of the picture. In addition, it will put your mind at ease to know that you are providing the new owner of your business with the best chance of continued success.