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Pre-Sale Preparation Guide: How to Prepare Your Business for Sale

Reading Time: 2 minutes

1. Assess Your Readiness to Sell

Before putting your business on the market:

  • Clarify Your Goals: Are you retiring, seeking a new opportunity, or cashing out?
  • Financial Needs: Understand how much money you need post-sale.
  • Emotional Preparedness: Prepare to let go of leadership and decision-making roles.

2. Organize Financial Records

Buyers will scrutinize your financials. Ensure:

  • 3-5 Years of Clean Financial Statements: Include income statements, balance sheets, and cash flow
    reports.
  • Tax Returns: These must reconcile with internal books.
  • Add-Back Schedule: Identify non-operational or one-time expenses.

3. Conduct an Internal Due Diligence Review

Be ready for the buyer’s inspection by:

  • Corporate Structure & Legal Documents: Review key documentation.
  • Contracts: Organize vendor, customer, lease, and employee agreements.
  • Licenses & Permits: Ensure all are valid and current.

4. Streamline Operations

A smooth-operating business is more attractive. Consider:

  • Standard Operating Procedures (SOPs): Document all workflows.
  • Reduce Owner Dependency: Delegate or automate tasks.
  • Team Strength: Retain key employees with contracts or incentives.

5. Maximize Business Value

Enhance key value drivers:

  • Revenue Stability: Focus on recurring revenue.
  • Profit Margins: Cut costs and improve efficiency.
  • Growth Potential: Document opportunities for expansion.

6. Value Your Business

Get a professional valuation:

  • Valuation Methods: EBITDA multiples, DCF, or asset-based.
  • Third-Party Valuers: Use brokers or CPAs for objectivity.

7. Prepare Marketing Materials

Present your business professionally:

  • Confidential Information Memorandum (CIM): A detailed overview.
  • Teaser Summary: A brief, anonymized profile.

8. Build the Right Team

Assemble professionals:

  • M&A Advisor / Business Broker
  • Attorney, CPA, Wealth Planner

9. Plan for Post-Sale Transition

Buyers may want:

  • Training Period: Often 3-12 months.
  • Employment Agreement: Short-term consulting.
  • Non-Compete Agreement: Standard in deals.

10. Protect Confidentiality

Avoid alarming stakeholders:

  • Use NDAs for all inquiries.
  • Limit Information Sharing until buyer intent is clear.

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