Your financial results impact the value of your company. But beyond increasing revenues and boosting profitability, having reliable financial statements gives Buyers more confidence in your business. This means having an up-to-date balance sheet that accurately reflects the assets and liabilities of the company. It would help if you prepared your financial statements in a consistent format year to year. While the bottom line of your tax returns may vary from your income statements because of accountant adjustments, a Buyer should be able to easily reconcile any differences between your tax returns and your income statements.
2. Customer and Vendors
The more, the better! Buyers fear the loss of key customers or the sudden loss of a supplier. To the extent that you can, try not to have any single customer represent a large portion of your revenues. The same applies to your suppliers. You may have purchased goods or services from the same vendor for years. That’s great! But always have back-up vendors to ease a Buyer’s fears about having all their eggs in one basket.
3. Physical Facilities/Assets
You are not selling a home, so there is no need to “stage” your office or warehouse to make it look like something out of a movie. But, your facilities should be clean and orderly, which hopefully allows the Buyer to think, “Gee, I could see myself spending 10 hours a day in this place.” And with fixtures and equipment, if it’s old and never will be used again, get rid of it. If you have inventory that hasn’t moved in ten years, write it off and dispose of it.
Document! Nobody wants to buy a restaurant that doesn’t have a written recipe book. Buyers want to know you have written policies and procedures in place that document your business operations, processes, and workflow. Written and current job descriptions are also highly desirable.
It would be great to have a written and defined marketing plan. Buyers understand that small business owners may not have a written plan, but at a minimum, you need to explain to a buyer how you find your customers and your overall marketing strategy. Create a book with a list of advertising sources, past results, passwords for PPC accounts, etc.
6. Employees and Staffing
Long-term employees who know their jobs and who are well compensated, is the dream of every Buyer. That is possible in service and manufacturing but less likely in food service and retail. Regardless, make sure that there are no employees with “The keys to the castle.” You shouldn’t have any employees that, if they left the company, could bring down the business or where you didn’t have another employee to step into their shoes seamlessly. Buyers love businesses where employees are cross-trained and even better, where there is management in place beyond the owner.
7. Attitude and Willingness to Be Flexible
The sale of a business is more than a simple purchase of assets. Buyers expect and need a training and transition period and the knowledge that the Seller will be available six months after the closing to answer a simple question. It is OK to negotiate, but it’s also essential to create a win-win situation and not create an adversarial relationship. So be flexible and willing to accommodate reasonable requests from the Buyer.