Label company owners are busy. Why do anything before you need to, right? Well, when it comes to selling your business, the more you can do ahead of time, the better. Here’s why.

Entrepreneurs often dream about selling their businesses, but it can take a while to get around to it. By the time they’re ready, they may be pressed for time due to health, family situation, finances, or retirement.

I get calls from owners asking, “How soon can I sell this puppy? What’s involved?” My answer is, “It depends. How much have you done already to prepare?” I talked to an owner a few weeks ago who was on the “three-to-five year” exit timeline. I gave him this homework:

Talk to your tax expert and your investment advisors. Do scenario planning on how you might sell your business and the tax ramifications for each option. Look at expenses and windfalls you might have in any given tax year. The actual tax year you sell your business makes a difference. If you want to stay on earning a salary or consulting for the new owner, evaluate the tax impact of that choice. Explore one scenario at a time and take it through to its logical conclusion.

Nobody likes to hear it, but if you’re planning around taxes, funding retirement, heirs, benefits, lifestyle, possibly relocating, and all the other moving parts of post-sale reality, then you also have to factor in the cost and impact of your death. My colleagues and I have had clients or their family members die or almost die during the sale of the business.

Don’t let avoidance, fear, panic or discomfort put you off. Schedule these important planning sessions with your advisors.

Tidy up the business before you put it on the market. Preparing a business so it looks good to buyers doesn’t happen overnight. If you don’t want to signal to employees that you’re planning to sell, you need to start the process early and make it look like it’s part of your everyday approach to running the business.

When clients work with me, I bill myself as a marketing strategist, not an M&A advisor. No one will look suspiciously at a consultant who comes in to help the company grow and be more profitable. The growth strategy we work on also tends to improve value and position the business, so you’re killing two birds with one stone.

A further benefit of tidying is that morale improves. As you become more organized and have a clearer picture of how valuable your business is, you’ll find that your employees and managers are happier, and thus less likely to jump ship when they discover you’re selling.

You may think, “Who cares? I’m outta here.” However, if your fate is tied to the new owner’s success – for example if you’re funding part or all of the sale, earning a salary from the new entity, or serving in a paid consulting role to the new owner – then you want to hand over a business that will survive and thrive. Tidying needs to be part of your master plan.

Hire or train a general manager who can run the business day to day. “But the expense!” you say. For sure. A GM’s salary on the books could suck away all the good work we’ve achieved in building up your EBITDA. But buyers are attracted to companies that have a knowledgeable manager who will stay on after the sale. 

Furthermore, a turnkey business with an experienced GM can be marketed to a wider array of buyers. Think about family offices, entrepreneurs coming over from other industries, competitors being run by second-gen leaders, and so forth. Don’t discount the GM option simply because of cost.

During the time you are busy and preoccupied with the sale of your business, you can’t let the ship sail without a captain. You can’t lash yourself to the steering wheel and think you can do it all. A solid general manager will keep the company on track, and that’s crucial.

Review a standard due diligence checklist to see what buyers might request. I can’t stress this enough. Complete as many items as possible before you put your company on the market. Work on due diligence items you expect a buyer will ask for. Complete them in a logical order, using a project management approach. Include steps for research, document creation, revisions, and wordsmithing. Include time for review by the M&A attorney or legal team that represents your interests in the sale. As each item is prepared, name it properly and add it to the inventory.

Preparation allows you to minimize surprises and showcase your company in the most positive light using the persuasive power of data. The buy-side experts reviewing your due diligence items are not just crossing things off their list as you submit them. They’re communicating to the buyer whether your business is worthy of the asking price and what your strengths and weaknesses are. They are looking for areas that could warrant a discount. Use the preparation stage of the selling process to anticipate and fortify.

Everything you add to your due diligence inventory should convey accuracy, clarity, transparency, and quality. Your honest evidence should help you make a case for your value. Your documentation should enhance the buy-sell process, giving the buyer confidence to keep moving forward with you.

Take care of the planning side, consult the right experts, and start checking things off your list. The peace of mind knowing you are truly ready will work in your favor.


Sandy Hubbard is a chief marketing advisor who helps position businesses strategically and powerfully. She advises specialty print manufacturers, converters, and finishers – helping them improve, grow, and position powerfully in a world of rising competition.  Her tenure in the industry has fostered business growth and success, allowing clients to make a difference in the world.



Feeling proactive? Here are items you can prepare ahead of time
Getting organized before you sell your business is a strategic move. I recommend starting with a standard due diligence checklist. I’m not an attorney or CPA, so these are just guidelines and not advice. For regulated sales, there are specific steps to follow. The buyer may ask for some, all, or none of the items below. A due diligence checklist can be pages long, so I won’t list everything here. For now, we simply want to develop your documentation so you can gain insight and powerfully position your company so it will be appealing to buyers.

All of these internal documents work together to help us build strategic evidence and a cohesive narrative that demonstrates your company is successful, well-run, and has profit written into its future.

GETTING STARTED

To begin, set up a secure, password-protected place to share and collaborate on internal, confidential documents. Keep it where your employees are unlikely to stumble across it. Gather business valuations and broker’s opinions of value. If your CPA or independent auditor has made recommendations about your business, include those.

FINANCIAL INFORMATION

Collect three years of financials along with company tax returns. If you have made large or questionable adjustments or write-offs, include documentation to substantiate what was done. Explain unusual circumstances or expenses a buyer would ask about. Summarize anticipated tax liabilities and corporate tax filings. Include annual and YTD financials and the previous continuous (no breaks) 12 months of income statements (trailing 12 months). Itemize real estate ownership, mortgages, rental agreements, long-term leases, appraisals, and tax information. Include property descriptions, building condition, use, location, corporate office location, production plant, off-site storage, and tenant information. Print out your annual budget. Create a line-item budget narrative with growth forecasts. Explain the assumptions you base your projections on, and extend your forecasts out three years. Update your list of debts, commitments, guarantees, bank relationships, and sources of personal and business lines of credit. Download your accounts receivable aging and collections information. Include customer retention and reactivation reports. List single source contracts and joint venture agreements. Describe strategic partnerships. List company assets with planned investments and depreciation/amortization schedules. Describe employee compensation, commissions, incentives, and management bonuses, including stock options. Document your 401(k) and healthcare programs and how they are funded. Include collective bargaining agreements.

OPERATIONAL INFORMATION

Create a company organizational chart with job titles, reporting structure and total number of employees at each location.

Update your equipment list. Calculate capacity and utilization. Explain seasonal or other variances. Outline your offerings. Describe customer markets, opportunities, and projected growth rate. List major competitors with a SWOT graph of each. Organize your supplier list. Explain if a vendor has forgiven past due balances or loans. Explain charges that have been deferred or postponed. Be transparent about favored status the buyer wouldn’t have access to. List all company-generated SOPs, training materials, handbooks, and other internal works that are your intellectual property.

POSITIONING INFORMATION

Acquire current industry ratios and economic reports. Write the company’s history, changes in ownership over the years, and an interesting version of the founder’s story. Include executive bios.

List awards and honors. Include year-over-year business lists where you’ve moved up in the rankings. Collect articles about the company that have been published in respected magazines. Create an archive of your achievements. Document your sales and marketing program. Collect superior examples of sales campaigns, advertising, and marketing materials. Note whether you use external providers such as a marketing agency, PR firm, sales trainer, or SEO expert.

List business and trade associations where you are a member. If you have a prestigious standing in a group or are an officer, include that. Collect reviews and testimonials. Promptly address complaints. Correct business information that appears online. Monitor sites such as Yelp, Better Business Bureau, etc. And update your website.

COMPLIANCE INFORMATION

List certifications required by customers, statutes, or regulation. Gather documentation on environmental compliance, disposal, remediation, reporting, rules, permits, exceptions, cradle-to-grave responsibility, hazardous materials, minutes from safety meetings, building or equipment modifications, notices, lawsuits, complaints, fines, and action required by regulatory agencies.

STRATEGIC INFORMATION

Itemize intellectual property, patents, software you created or significantly customized, and equipment modifications that are uniquely yours. Update your disaster plan. Document your credit and collections process. Describe how you manage inventory.

Describe longevity of employees, your retention program, recruitment, hiring, turnover, and severance. Include disputes, strikes, or work stoppages that affected profits or quality. Include documentation on reportable accidents and injuries. Summarize insurance coverage. List the status of current or pending lawsuits. List financial relationships, transactions, or situations that skew your P&L in your favor. A common issue I see is when the owner’s spouse and family members are working for less than the prevailing wage.