Deciding to sell my business was a pivotal moment in my entrepreneurial journey. I poured my heart out over eight long years to make the business the best it could be, so exiting was a decision that I didn’t take lightly.

I knew that I would need some help, seeing as I had never sold a business before, so I hired investment bankers to assist in the sale process. From start to finish, my exit took 11 months.

I learned so much about high-dollar business sales during that time; it was enough to make anyone’s head spin.

Looking back on the process, I realize I could have made it easier on myself had I just done a few things differently.

Your Emotions and Selling

Selling a business isn’t just a financial decision. It’s emotional.

Think about it. You’ve poured blood, sweat, and tears into building your company from the ground up. It’s like a child to you, and detaching from something so personal can be tough.

But emotions can cloud judgment. They can lead to hasty decisions or even stall a sale. That’s why it’s crucial to be mentally prepared. This way, when the time comes to hand over the reins, you’re ready. Not just emotionally but strategically as well.

And I should note that it’s not just about getting a good price. It’s about ensuring your business, something you’ve nurtured for years, goes into the right hands and continues to thrive. It helps you move forward confidently and in a way that you can be proud of after the sale is done.

Tip #1: Getting Your Financial House in Order

Let’s cut to the chase. When selling, buyers want clarity. Full stop.

They want to know exactly what they’re buying into. And nothing speaks clearer than solid financials. I spent a significant amount of time getting my financial records in pristine condition when selling my business.

This may seem simple on the surface, but when you use e-commerce platforms, pricing, and policies throughout the years, it adds a layer of complexity. Take it from me: the biggest favor you can do for your business is to have a solid CPA involved from the very beginning.

1. The Significance of Clear Financial Records

Your financial records are the heart of your business’s health. They show profitability, cash flow, debts, and assets. They give a snapshot of where the business stands and (more importantly) where it’s heading.

Think of it this way: would you buy a car without checking its engine? Financial records are the business’s engine. Clear records not only make your business more appealing but also boost buyer confidence. They show you have nothing to hide.

2. Tips for Cleaning Up the Books

First things first, if you’re not already using accounting software, start now. It’ll make your life easier. Programs like QuickBooks or Xero can help streamline this. If you’re knee-deep in spreadsheets, consider hiring a bookkeeper.

They’ll help you sort out discrepancies, classify expenses, and ensure everything is up to standard. In fact, you can keep a bookkeeping service for as little as a couple hundred dollars per month. It’s worth it come tax time and when you think about selling.

But it’s not just about making numbers look pretty. It’s about accuracy. Make sure you (or your bookkeeper) go back and check for any overlooked expenses or income. Double-check that taxes, employee salaries, and other liabilities are updated as well.

3. Understanding the Valuation of the Business

As important as it is to have clear numbers for your business, valuation isn’t just about numbers. It’s about potential. Your business’s reputation, its position in the market, customer base, and even future industry trends all weigh in when you’re selling your business.

How profitable is your business? What’s the revenue? What are the growth trends? Where are the growth opportunities? Once you’ve got these nailed down, you can delve into other value drivers.

Remember, selling a business isn’t about what you think it’s worth. It’s about what someone is willing to pay. So, understanding valuation is like speaking the buyer’s language. You have to sell them on your current business and its potential.

Tip #2: Preparing Your Team and Infrastructure

Selling a business isn’t just about assets and numbers on a spreadsheet. People are involved. Your team plays a huge role in the appeal of your business to potential buyers. Plus, having a well-oiled infrastructure can add significant value. Let’s dig into that.

1. Why a Strong, Independent Team Increases Value

Your team can be a game-changer. A trained team that can operate without you signals to the buyer that the business can run smoothly after the sale. It indicates that the business isn’t overly dependent on any one individual, which is a big green flag. It means continuity.

When I was selling my company, I went to great lengths to demonstrate how the business was doing great while I was hardly involved with the day-to-day operations.

I knew that I had to convince the potential buyers that I was not the key ingredient to success. If you’re too critical of your company’s success, they won’t have confidence that they can do the same without you.

Imagine this scenario: two similar businesses are up for sale. One constantly needs the owner’s input for daily operations, while the other operates seamlessly with a competent manager and team. Which one would you pick as a buyer? The choice is pretty clear.

2. Streamlining Operations for the New Owner

When someone buys a business, they don’t want to buy into chaos. They want a plug-and-play model, something they can smoothly transition into. This means your operations, from management to customer service processes, need to be streamlined.

Start by documenting everything. Manuals, guidelines, process flows — get it all down. Next, look for inefficiencies. Can any process be made simpler? If you’ve been doing something just because “it’s the way it’s always been done,” question it. Maybe there’s a better way now.

I was lucky in that I created a pretty robust intranet for my business a few years prior to selling. I mainly did this for my growing team. The more employees that came on, the more I needed to have everything documented. It turns out that this was a huge asset later down the road when I was having conversations with potential buyers.

The short of it is that technology can be a great ally. If you haven’t already, invest in modern management software that makes tracking, monitoring, and managing easier.

3. The Importance of Transparency with Employees About the Sale

Your team has been with you through thick and thin. The last thing you’d want is to blindside them with news of a sale. They deserve to know, and you need them to stay on and maintain business performance.

But timing is everything. Tell them too early, and you might create unnecessary panic. Tell them too late, and you risk a breach of trust. Find that sweet spot. Assure them of their value and the reason for your decision. Also, a well-informed team can even help in the transition, making it smoother for the new owner and preserving the business’s value.

I told my leadership team about the sale before I told the rest of the company. I did it in part because I needed their help, but I also just wanted them to know what was going to happen.

Tip #3: Crafting a Clear Exit Strategy

Just as you planned when you started your business, you need a detailed blueprint when you decide to step away. That blueprint is your exit strategy.

If you hire investment bankers like I did, then they’ll help you create this blueprint. They have a ton of tried-and-true processes at their disposal that you can leverage for your sales process.

If you aren’t going the investment banker route, then you’ll need to make sure you document this kind of stuff yourself.

1. Importance of Having a Documented Plan for the Future

Imagine trying to assemble a complex puzzle without the picture on the box. Tough, right? Selling a business without an exit strategy is similar. You’re left trying to fit pieces together without a clear vision.

Having a documented exit plan gives you direction. It outlines your objectives, timelines, and the steps needed to achieve your desired outcome.

With this roadmap, you avoid unnecessary detours and make informed decisions that align with your end goal. It helps in transitioning the business, ensuring responsibilities are clear, and reducing any potential hiccups.

2. Key Components of an Effective Exit Strategy

An exit strategy isn’t a one-size-fits-all document. It’s tailored to your business and your objectives. However, several components are commonly seen in effective strategies:

• Goals and Objectives: Clearly outline what you want to achieve with the sale. It could be a monetary value, ensuring the business legacy, or maybe a mix of both.
• Valuation and Price: Understand the worth of your business. This isn’t just about current earnings but also potential future revenue.
• Transition Plan: Specify how you’ll hand over the reins. Will it be immediate? Will there be a phase where you’re still involved to some extent?
• Legal Considerations: Cover any legal aspects of the sale, including contracts, agreements, or obligations that need settling.
• Stakeholder Communication: Plan how and when you’ll communicate the sale to stakeholders, be it employees, customers, or suppliers.

3. How an Exit Strategy Enhances Business Attractiveness to Buyers

A clear exit strategy signals to potential buyers that you’re serious and have put thought into the process. It shows them there’s a plan for continuity, minimizing risks associated with the change in ownership.

Buyers don’t just buy what your business is now; they’re buying its future potential. An exit strategy provides a clear picture of that future, making your business more appealing. It’s like handing them the playbook on how the business can be successful post-purchase. Who wouldn’t want that head start?

Mistakes You Should Avoid

One frequent error in the sales process is procrastinating on key preparations. Delaying tasks, especially regarding financials or operational adjustments, can lead to undervaluing your business.

Get things done, and get it done on time. Yes, it’s stressful. But if you’re like most people, then you’ll only have to do this once in your life. Suck it up!

Emotion can be another tripwire. While it’s natural to be attached to your business, letting feelings dominate the sale process can cloud your judgment and decision-making.

Keep your emotions at the door as much as you can (we’re all human, so it’s normal to be emotional on some level). Stick with the facts. The numbers. You need to provide hard proof to maximize the sale value.

Go Beyond just Ticking Boxes

The steps involved with selling your business should be taken seriously, as it’s all about safeguarding the value of your hard-earned venture. Every detail, from finances to exit strategies, plays a part in a seamless transition.

By addressing these essential areas, you set your business up for a successful handover.

For those of you considering a sale, taking the time now to handle things correctly can lead to a smoother, more rewarding transition in the future. Dive into the must-dos and position yourself to fully benefit from your hard work.

Hey, thanks for reading!

I’m Justin — I can help you to grow your profits.

Prior to coaching, I was the founder and CEO of an edtech startup, achieving a respectable 32% YoY growth and 76% profit margin over eight years before eventually selling.