How to Prepare Your Small Business for Sale: Ultimate Checklist

Ready to sell your small business but not sure where to begin?

We’ve been there. We get it.

Luckily, you came to the right place.

Let’s break down exactly how to prepare your small business for sale!

Key Takeaways

• Preparing your business for sale is key to maximize profits, reduce time on the market, and ensure a smooth transition.
• To prepare your business for sale, determine your goals, optimize operations, create a support team, organize your paperwork, get a business valuation, create your marketing story, and identify and vet potential buyers.
• Consider other things like timing of the sale, confidentiality, post-sale transition, buyer qualifications, and employee retention when preparing to sell your business

Why It’s Important to Prepare Your Business for Sale

Why prepare? It’s simple! Preparing your business for sale is the key to maximizing its value, reducing how long it spends on the market, and ensuring a smooth transition to new ownership.

Preparation also improves buyer confidence by offering a well-documented, stable, and profitable business, which can lead to a higher sale price and a quicker negotiation. It also helps avoid common complications like undervaluation or legal issues.

Steps to Prepare Your Business for a Sale

We’ve got the why; now, here’s the how!

1. Determine Your Goals for the Sale

The first and most important step is to identify and define your actual goals for the sale.

Think about what you really want out of the sale of your small business. Is it the highest possible financial return? Maybe you want the sale to be as quick as possible. Or maybe your top priority is a smooth transition that preserves the legacy of your business.

No matter what the case, having clear objectives will inform and guide your strategy. It’s important to consider both your personal and professional goals—whether it’s time for you to retire, you’re excited to start a new venture, or you’d rather invest in other opportunities.

Your goals should also include consideration for the well-being of your employees, customers, and the continued success of the business.

2. Optimize Business Operations to Enhance Value

Next, get your house in order by optimizing your current business operations to make it as attractive as possible for the prospective buyer.

Efficient and optimized business operations show potential buyers that your business has efficiency, scalability, and profitability, which makes it look like a great buy.

Begin this process by looking into your current processes and identifying areas where you can get better, like reducing waste, enhancing productivity, or automating routine tasks.

Make sure your supply chains are stable, you’re on top of inventory management, and your customer service is excellent. If you haven’t yet, take this time to standardize procedures and document key processes to make the transition over to new ownership as smooth as possible.

Offering a business with efficient, well-run operations increases its marketability and instills confidence in buyers.

3. Create a Support Team

Next, it’s time to create a team to help facilitate the sale of your small business.

The first step is to find a business broker to help you find the right buyer and negotiate favorable terms. Next, you’ll need an accountant to make sure your financials are accurate and ready to be looked into by buyers. Lastly, you may want to invest in a legal advisor to handle contracts, due diligence, and any potential legal issues.

If your business is uniquely complex, think about bringing on a tax advisor to help minimize tax liabilities, a financial planner to help figure out what to do with the money you make off the sale, and possibly a consultant to help streamline operations before you sell.

4. Organize Your Paperwork and Records

Now, it’s time to get all your paperwork in order.

Gather and organize all relevant financial documents like profit and loss statements, balance sheets, tax returns, and records of outstanding debts or liabilities.

Being able to provide accurate financial documents is especially crucial during the due diligence phase, where buyers will carefully examine every aspect of your business’s financial health to assess its true value and find any potential risks.

Along with financial records, get together your legal documents like contracts, leases, intellectual property rights, and employee agreements. Having this paperwork together increases buyer confidence.

5. Get a Business Valuation

Now, it’s time to get an accurate look at how much your business is worth.

There are many different ways to do this, so choose the one that’s right for your specific business and industry.

The main three, which can be broken down further, include:

• Market-Based Valuation– The value of the company is estimated by looking at what investors are willing to pay for similar companies.
• Asset-Based Valuation– The value of the company is based on assets minus liabilities.
• Income-Based Valuation– The value of the business is based on how much revenue it will likely generate in the future.

Check out our post for a more detailed guide on valuing your business >>

6. Create Your Marketing Story

It’s finally time to figure out your marketing story; a vital step in preparing your business for sale.

Remember that this goes beyond just the facts and figures. This is your opportunity to tell the narrative of your business, showing its unique value, growth potential, and the vision that has driven its success.

Start your story with what makes your business different from competitors, whether that’s a loyal customer base, innovative products, a strong brand reputation, or a history of overcoming challenges.

Your story should also align with industry trends, proving that your business is sure to thrive in the coming years.

7. Identify & Vet Potential Buyers

Last but certainly not least, it’s time to find and vet potential buyers.

A business broker is essential to this step in the process, as they are equipped with the knowledge of what you’re looking for in a buyer and able to thoroughly vet potential buyers to ensure that they’re legit and serious about purchasing your business.

Other Things to Consider When Selling Your Business

Here are just a few other things to keep in mind when preparing to sell your business.

Timing the Sale: Considering things like the health of your business and market position, as well as industry and economic trends can help you sell your business at the right time, ensuring a successful sale.

Maintaining Confidentiality: You may want to keep the sale confidential to prevent disruption among employees, customers, and suppliers. Things like non-disclosure agreements (NDAs) with potential buyers could prove beneficial.

Preparing for Post-Sale Transition: Plan the handover period and take some time to think about your own next steps in life.

Assessing Buyer Qualifications: Choosing the right buyer with the right proposal is essential to the success and legacy of your business.

Employee Retention and Transition: Protect your employees and prepare them for the transition to new ownership.

Frequently Asked Questions

How do I prepare my business to sell?

To prepare your business for sale, determine your goals, optimize operations, create a support team, organize your paperwork, get a business valuation, create your marketing story, and identify and vet potential buyers.

How do I price my business for sale?

To price your business for sale, follow a market-based, asset-based, or income-based valuation method.

How do you package a business for sale?

Package your business for sale by optimizing business processes, creating a marketing story, and getting your records and paperwork in order.

How do you position your business for sale?

To position your business for sale, determine your goals, optimize operations, create a support team, get a business valuation, organize your paperwork, create your marketing story, and identify and vet potential buyers.

How do you sell a small business quickly?

To sell a small business quickly, understand valuation methods and use a strong support team to facilitate a quick and efficient sale.

What is a good sale price for a business?

A good sale price for a business is highly subjective based on the business’s value, but usually, a business sells for 2 to 3 times its worth.