Preparing Your Business for a Future Sale
What to work on now, even if selling is still a few years away
When you’re busy running a business, preparing to sell it can feel like something you’ll deal with later. There are customers to take care of, employees who need you, and decisions that can’t wait.
But some of the work that makes a business easier to sell takes time. Getting the books in order, training someone to handle your responsibilities, or working through a lease issue may be difficult to fit into the months before a sale.
You don’t have to decide when you’re selling to begin preparing. You can start by looking at the business through a buyer’s eyes.
What would a buyer be buying?
You know how much work you’ve put into your business. A buyer needs to understand what they can reasonably expect from it once you’re no longer in charge.
That means looking beyond revenue. How much does the business earn after expenses? Are those earnings consistent? Do customers come back because of the business, or primarily because of their relationship with you?
Other details matter, too: whether revenue depends on a few customers, whether experienced employees can manage daily operations, the condition of the equipment, and the terms of the lease. Together, these help explain the opportunity and the risk a buyer would be taking on.
Establish business value before marketing to buyers. A valuation can help you set expectations, although the eventual price will also depend on the terms, financing, and what the buyer learns during their review.
An early conversation with a business broker or valuation professional can help you identify what deserves attention before setting a price.
Get your records ready before someone asks for them
It’s much easier to prepare financial records at your own pace than to search for them while a buyer is waiting.
Buyers commonly request:
Several years of business tax returns, profit and loss statements, and balance sheets
Current year-to-date financial statements
Payroll records and details of owner compensation and benefits
Support for proposed adjustments to earnings
Accounts receivable and payable reports
Inventory, equipment, and debt information
The numbers should make sense together. If your tax return and internal reports show different results, your accountant should be able to explain why. If revenue dropped one year or expenses increased sharply, gather the information that explains the change.
Owner compensation, personal expenses paid through the business, and certain one-time costs may also need review. Some expenses may support an adjustment to reported earnings, often called an “add-back,” but each adjustment needs an explanation and documentation. Calling an expense unusual doesn’t necessarily mean a buyer will agree to exclude it.
Start with a secure folder and a list of what’s missing. Your accountant can help you work through the gaps, and your business broker can help you decide when and how to share confidential information.
Make it easier for someone else to run the business
Imagine taking two weeks off without checking your phone. What would happen?
Would your team know how to handle a customer complaint, place an order, or prepare payroll? Or would those tasks wait until you returned?
Many owners have become the person everyone relies on. That creates a question for a buyer: How will the business function when the owner leaves?
You can begin addressing that question in small ways. Write down how you handle recurring tasks. Train an employee to take over a responsibility. Make sure important business information is available to the people who need it through secure systems.
Customer and vendor relationships deserve attention, too. If you’re the only person who knows the key contacts, consider gradually involving another team member.
Choose one task that currently depends entirely on you and work on transferring it. You’ll learn where the instructions, training, or systems need improvement.
Take a closer look at what could hold up a sale
Some issues are easier to address while you still have time to consider your options.
A lease is a good example. If it expires soon, or a transfer requires the landlord’s approval, review that early. The same goes for major contracts, franchise agreements, licenses, and permits. Don’t assume they will automatically carry over to a new owner.
Other concerns may include outstanding liens, unclear ownership of equipment, unresolved disputes, or missing financial information. Whether an issue affects the sale will depend on the circumstances, but discovering it late can leave everyone with fewer options.
Gather the relevant documents and ask your advisors to help you identify anything that needs attention. Knowing about a potential problem gives you time to work on it.
Bring the right people into the conversation
You may already have an accountant and an attorney who know your business. Let them know you’re thinking about a future transition, even if your plans are still taking shape.
A business broker can help you assess sale readiness, prepare for the market, protect confidentiality, screen buyers, and coordinate the process. Your accountant or tax advisor can help with the financial records and tax implications. An attorney can review the sale structure, agreements, and legal obligations.
Depending on the transaction, you may also need a valuation professional, lender, escrow or closing professional, or financial planner. An exit planning advisor can help connect the work on the business with your personal and financial goals.
Getting advice before you make commitments gives you more time to understand your choices.
Think about what you want after the sale
It’s easy to focus on a price and leave the rest for later. But the kind of transition you want matters, too.
You may want to retire completely, spend more time with family, or move on to another business. You might be comfortable staying for a training period, but less interested in a long-term role under new ownership.
Think about what matters to you beyond the money. Perhaps it’s keeping the team together, finding a buyer who will continue serving your customers, or stepping away by a certain date. Those priorities can help guide decisions when an offer comes along.
You’ll also want to understand how much you may retain after debt repayment, taxes, and transaction expenses. Payment terms matter as well. Talk those questions through with your financial and tax advisors before relying on an asking price to fund your plans.
Where should you start?
Set aside a little time to answer three questions:
Could the business operate successfully without my daily involvement?
Are my financial and operational records current and organized?
Do I know what I would like life to look like after a transition?
If one answer is “not yet,” start there. Schedule a meeting with your accountant, review your lease, or document a task you’ve been meaning to hand off.
These improvements can make the business easier to manage today while helping you prepare for a future sale. You can make progress without having every detail of your exit worked out.
At LegalWise Business Brokers, we help owners work through sale preparation, business valuation options, and exit planning. If you’d like to talk about where to begin, contact us for a confidential conversation.
Disclaimer: This article is provided for general educational
and informational purposes only. It is not legal, tax, accounting, valuation, investment, or lending advice and does not create a broker-client or other professional relationship. Every transaction is different. Business owners, Sellers, and Buyers should consult appropriately qualified professionals regarding their specific circumstances.
AI Disclosure: This post was written with the assistance of an AI language model. The human author provided the topic and key points, verified the information, and performed all final editing. The AI (ChatGPT) helped expand on the details and refine the writing. The final content was reviewed and edited by a human to ensure accuracy and quality.
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