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If you own a Main Street business and are planning to sell within the next few years, it's important to start preparing your business for sale now. Preparing your business for sale involves taking steps to improve its financial health, streamline operations, and enhance its value to potential buyers.
It is important to remember that selling a business is a personal decision, in addition to a financial one. Personal goals should be assessed to determine if pursuing a sale is the best option. In addition to the impact the business has on employees and the community in which it operates, many owners benefit from early exit planning as ample preparation leads to the best outcomes for all those involved.
Step 1: Get Your Finances in Order
The first step in preparing your business for sale is to get your finances in order. This can involve hiring a professional accountant or bookkeeper to help you review and organize your financial records. You'll need to prepare financial statements, including balance sheets, income statements, and cash flow statements. It's also important to address any outstanding debts or financial issues that could impact the value of your business.
It is particularly important for small businesses to maintain good bookkeeping if they plan to sell to a buyer who is using an SBA loan to finance the acquisition. The Small Business Administration (SBA) requires detailed financial records and statements to evaluate a business's financial health and viability. The SBA loan program allows lenders to offer financing to small businesses that may not qualify for traditional bank loans, but they must ensure that the business has a strong financial history and can generate enough cash flow to repay the loan.
If a small business has poor bookkeeping hygiene, it may not have the necessary financial records or may have incomplete or inaccurate records. This can lead to delays in the loan approval process or even result in the loan being denied altogether. Furthermore, poor bookkeeping can negatively impact the business's valuation, as potential buyers may view the lack of financial transparency as a red flag and reduce their offer price accordingly.
Step 2: Improve Your Operations and Processes
The second step in preparing your business for sale is to improve your operations and processes. This involves evaluating your current business operations and identifying areas where you can increase efficiency and productivity. There are many products and services available that can help small business owners improve the efficiency and profitability of their operations. Here are some examples:
Accounting Software: Accounting software, such as QuickBooks or Xero, can help small business owners manage their finances more efficiently and accurately, including bookkeeping, invoicing, and financial reporting.
Customer Relationship Management (CRM) Software: CRM software, such as HubSpot or Salesforce, can help small business owners manage customer relationships more effectively, including tracking leads, managing customer communications, and analyzing customer data.
Project Management Software: Project management software, such as Trello or Asana, can help small business owners manage projects and teams more efficiently, including assigning tasks, tracking progress, and collaborating with team members.
Website and E-commerce Platforms: Website and e-commerce platforms, such as Shopify or Squarespace, can help small business owners create a professional online presence, manage online sales, and process payments more efficiently.
Marketing Tools: Marketing tools, such as email marketing platforms like Mailchimp or social media management tools like Hootsuite, can help small business owners reach and engage with customers more effectively, and ultimately drive sales.
It's important to document your processes and procedures, so that potential buyers can see how your business operates and understand its potential for growth. By making your operations more efficient and transparent, you can increase the value of your business and make it more attractive to potential buyers.
Step 3: Clean Up Your Legal and Regulatory Compliance
The third step in preparing your business for sale is to clean up your legal and regulatory compliance. This involves reviewing your business contracts, licenses, permits, and other legal documents to ensure they are up-to-date and in good standing. You may need to resolve any outstanding legal or regulatory issues, or obtain new licenses and permits if necessary.
Selecting the right lawyer is an important step for small business owners who are looking to sell their business. Here are some factors to consider when choosing a lawyer to help with the sale:
Expertise: Look for a lawyer who has experience in business sales and mergers and acquisitions. They should be knowledgeable about the legal issues that can arise during the sale process, including contracts, negotiations, and due diligence.
Reputation: Seek recommendations from other business owners or industry professionals to find a lawyer with a good reputation. Read online reviews and testimonials, and ask for references from the lawyer's previous clients.
Communication: Choose a lawyer who is responsive and communicates clearly and regularly throughout the sale process. You want to feel confident that your lawyer is available to answer your questions and address any concerns that arise.
Fees: Understand the lawyer's fee structure and ensure it aligns with your budget and the expected value of the sale. Some lawyers charge a flat fee, while others charge hourly rates or a percentage of the sale price.
By considering these factors, small business owners can find a lawyer who is the right fit for their needs and can help ensure a successful sale of their business. It is important to take the time to do your research and choose a lawyer who is knowledgeable, reputable, and easy to work with.
Step 4: Assemble Your Team of Advisors
The fourth and final step in preparing your business for sale is to assemble a team of advisors to help guide you through the process. This can include a business broker, accountant, attorney, and other professionals with expertise in mergers and acquisitions.
While we may be biased, we'd like to throw our hat in the ring to represent you as a business broker. Beacon is a team of advisors, technologists, and marketers dedicated to advancing small business ownership in the United States. We combine experienced business advisors with technology to help retiring owners pass the torch to the next generation. Our customers are current owners looking to sell and entrepreneurs looking to dive into one of America’s most overlooked asset classes. Our average rating on Google is 5 stars, and we can provide a number of references from Texas business owners who have bought or sold businesses through Beacon.
Conclusion
Preparing your Main Street business for sale can be a challenging process, but it's one that can be made easier with the help of a business brokerage firm like Beacon. With years of experience helping Main Street business owners prepare their businesses for sale, Beacon can provide expert guidance and support throughout the process.
By following the four steps outlined in this article, you can improve the financial health of your business, streamline operations, enhance your marketing and branding, clean up your legal and regulatory compliance, and assemble a team of advisors to guide you through the process. And if you choose work with Beacon, we will provide you with the best of human and technological resources to ensure that your businesses is accurately valued and marketed widely, and that you feel supported throughout the process.
Don't wait until the last minute to start preparing your business for sale. Contact Beacon today to learn how we can help you maximize the value of your Main Street business and achieve a successful sale.
Explore your options
Get a 100% confidential and complimentary business valuation.
John takes a personal approach when advising buyers and sellers on taking the next step. John has deep knowledge of a variety of markets through his background as a member of the Chicago Board of Trade and experience as a licensed real estate agent in Texas and Michigan. Originally from Detroit, John's passion for automotive runs as deeply as his love of Wolverine Football.
Information posted on this page is not intended to be, and should not be construed as tax, legal, investment or accounting advice. You should consult your own tax, legal, investment and accounting advisors before engaging in any transaction.
Calder Capital
Sam Domino