Why Organization is an Important Part of Selling a Business - VR Business Sales Blog

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Wednesday, January 8, 2014

Why Organization is an Important Part of Selling a Business

Peter King
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It doesn’t matter what you are buying or selling. Buyers want to buy low. Sellers want to sell high. It is all a matter of strategy when going into a transaction negotiation. But, as a seller you need to be organized and be ready with the most positive spin on any answer to the tough questions that inevitably will come up.

valuing your businessGet your books in order. If you are a business owner and are even considering the prospect of putting your business on the market the first thing you need to do is get organized. Sloppy, incomplete, or inaccurate books can scare away buyers.

To give buyers confidence it makes sense to get audited financials for several recent years, which can be costly but is a great investment to make since it gives buyers a greater sense of your commitment and readiness for full disclosure.

Really understand your selling trends. Buyers want to see evidence of profit and actual, or potential growth. Buyers also want to understand your customers in terms of repeat business, subscription/auto-renewals, and customer turn over.

Be real about your business reputation.  (See our previous blog post on reputation management.) Know what the “word on the street” is about your business. In real life terms, you want to be one step ahead of any question that might come up about your business so you are prepared with a “come back” and keeping things positive.

Take stock of your products, intellectual property and paperwork.  Buyers are not looking for homework or unwanted surprises when they take over a business. So, now is the time to quite literally as well as figuratively take stock of your products and services.  Understand physically what you are selling. Go through any services, product names, or intellectual property issues. Know now if you have any legal, paper work, or other issues that needs addressing prior to a buyer’s investigation process. You don’t want to be back peddling and potentially give buyers a reason to back out if there are concerns that have not been neatly tied up. 

Can your business run without you?  Documentation related to how your business actually runs is essential. A business manual with every detail necessary to actually make the day to day, weekly, monthly, and yearly aspects of your business functions is not negotiable. How else will a buyer walk in and take over if you are the only person who knows how to do what you do? EVERYTHING needs to be written down in relation to processes…everything. 

Know (realistically) what your business is worth.  Just as a homeowner might get an appraisal from a qualified real estate agent on a proper selling price for their home, you too need to get a professional valuation to determine an accurate selling price for your business. But, before you do—you need to get organized so that the business broker handling this task can evaluate your business in its best light. Once you know objectively what your business is worth, you can make decisions (like a homeowner doing renovations to increase a home’s value) whether to make strategic investments in the business to increase the value and thereby the selling price.       

If you've been waiting for a healthy environment to sell a business, 2014 may be your moment. By doing the upfront work prior to actually placing your business on the market, you will speed up the buying process and net a higher price for greater profits.


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