Dwivedi says preparing for a sale often starts by building a trusted team of advisors.
The first person to contact is a trusted business advisor who will help you to get an overall understanding your business, and help you to clarify what you want to achieve with the sale and how you will get there.
Your strategy advisor could be an exit planning expert or a mergers and acquisitions specialist. This person will help you:
- clarify why you’re selling
- identify what you want to get out of the transaction
- help you understand all aspects of the sales process (This includes valuation, due diligence, the transition process, do’s and don’t and the costliest mistakes to avoid.)
- advise you on preparing your business for its sale
“The general advisor will help you take personal stock of what you want, to help you get very clear on why you’re selling,” says Dwivedi. “This is a very important first step or first introspection point. Unless you’re very clear on the what and why behind the sale, you may not get what you want from the transaction.”
It can be tempting to go to your lawyer or accountant first, he says, but they are going to give you very specialized advice from a single perspective.
“A general trusted advisor, on the other hand, can bring together all the moving parts—legal, accounting, insurance and tax,” says Dwivedi. “This is the quarterback of your advisory team, who will play the role of strategist and help the others work simultaneously, rather than sequentially.”
Most of all, the strategy advisor will propose improvements and investment to help make your business more attractive to potential buyers and maximize its sale value.
Your lawyer will help you look at compliance laws and regulations affecting your business. The lawyer will also help you anticipate any changes in the legal or regulatory landscape.
As you examine your assets, including intangible assets like intellectual property, the lawyer can also help you understand your ownership rights and what can be transferred as part of the sale.
Intellectual property may include:
- trade secrets, such as customer and marketing information
- your brand, logos and trademarks
- patents and product designs
- processes that are unique to your firm
The lawyer can help you draft a shareholder agreement and update the buy-sell agreement between all shareholders, something you should always have current regardless of sale. The lawyer also drafts the terms and agreement of the sale.
Before buying your business, the buyer will want to carry out a thorough due diligence to ensure your books are in order. An accountant can help you prepare beforehand so there are no unexpected surprises.
For example, many business owners mix their personal and business finances. “It’s not uncommon for small businesses to have their personal and business income tied up together,” says Dwivedi.
But if you’ve been writing off business expenses to lower your personal tax or sprinkling income among family members as a tax shelter, you may put off potential buyers. Your accountant can help you identify these types of red flags and clean up your books.
The business valuator
A business valuator can dig deep into your numbers to get a professional estimation of the price range value of your business, so you can prepare for the sale.
With a realistic value in mind, you will have a clearer idea of buyers to target. You’ll also be better positioned to negotiate a price.
Your banker will ensure you can finance a deal if the buyer requires vendor financing. He or she can also play a role in finding a potential buyer. The banker can also play an important role in helping make the business more attractive for potential buyers by financing reinvestments into the business and providing strategic advice.
The estate planner
Your estate planner or financial advisor helps you determine where to invest, save or distribute the money from the sale of your business. Ideally, you’re planning the sale of your business five to ten years in advance.
“A lot of people say, ‘I’m going to work until I’m 70 and then sell,’” says Dwivedi. Your estate planner will help you determine the feasibility of your retirement plan, and the tax repercussions of selling your business, particularly if your succession plan includes selling to a family member.
The commercial realtor
A commercial realtor can identify the value of your business’s real estate holdings. The realtor can also provide tips and advice on how to stage the property to give it that “curbside appeal” and make it more attractive to potential buyers.
The insurance specialist
An insurance specialist helps identify insurance strategies to aid in the sale. This advisor can help you determine if it’s worth financing the shareholder agreement with insurance policies in the event of death or disabilities. They can also help you find the best strategies to protect against unforeseen losses.
The family advisor
Family-owned businesses can turn to a professional to help them understand succession, shareholder status and individual family-member rights to the business. If a succession plan involves selling a business to multiple family members, this advisor can help minimize emotions and figure out what’s “fair” between siblings or others inheriting or purchasing the business.
The investment banker or the business broker
Depending on the size of your business, you may look to one or the other of these professionals to help find a buyer. Most mid-size and large businesses include an investment banker on the team. For smaller businesses, the business broker often lists the business and seeks out potential buyers.