As a business owner, you know how hard it is to build, grow and run a company. Why would you invest all that time and effort and then risk selling your business for less than it’s worth, or not realize its full potential? Nobody wants to do that, and yet many business owners still make mistakes that jeopardize a successful transaction because they either fail to recognize a problem, lack experience, or don’t get the right advice from the right advisor. Here are a few things that can trip up business sellers when getting ready to put their company on the market, and how to get ahead of them.

Don’t wait too long to assemble a transition team

It’s important to come to terms with the fact that you may be an expert at running your business, but not selling a business. Most business owners will only sell one business during their lifetime, while some professionals make a career of it. If you are going through this process for the first time, you are already at a disadvantage to buyers who invest in many companies. A lot of business owners just don’t know who to call or what experts they need. You need to assemble a team of good financial and legal advisors, and most importantly, a good M&A advisor or business broker. Having an experienced business broker can help you to shore up all of your other issues and give you the leverage you need to deal with potential buyers.

Know what deficiencies need to be addressed

As a business owner, you must have an objective view of your company and understand its weaknesses. You may have deficiencies within your operations or your staff. A business broker can help consult with you in creating a plan to address potential operations issues. They can also help you put together a succession plan so that you have the right leadership team in place. Be sure to fill all critical positions, especially at the management level. Don’t assume you can fix all of your problems at the last minute. Some of them will be long-term projects, which is why it is important to start the sale process as far in advance as possible.

Don’t make yourself irreplaceable

While building your succession plan, you should also focus on minimizing your business’s reliance on you. This is not only good for selling your business, but also part of a good growth strategy. Build your leadership team so the business can experience a smooth transition after the sale. Investors are attracted to businesses that have a good management team in place. They are typically not looking to go through growing pains where they must learn how to run the business themselves because the most knowledgeable employee is no longer with the company.

Know the true value of your business

You don’t want the unpleasant surprise of finding out that buyers aren’t willing to pay what you are expecting to receive. While you may think you know what your business is worth, the only way to truly know is through a third party valuation. While realtors, appraisers and other professionals are technically able to do this for you, the best person to consult with is a business broker or M&A advisor. They know the market for business sales better than anyone else. A broker will factor in the health of the industry, market conditions, financial health, tangible assets and intangibles such as intellectual property and your competitive edge. Every aspect of your business has a value, and they will include it and leverage it in marketing. Once you know how your company is valued in the industry, you can start improving key metrics.

Develop a personal financial plan

When exiting a business, it is important to understand how much you will need to reach your lifetime spending goals and support your lifestyle. Knowing what this “number” is will tell you the minimum profit you need from the sale of the business. If your valuation comes in below this baseline number, you might be better off building your business for a few more years until you can reach your exit goals. This type of financial planning isn’t something you should try to do on your own. Consult with a professional financial advisor to help you budget for your post-sale life. Once you have your “number”, a business broker can help you to formulate an exit strategy that will work towards achieving it.

Bring your accounting up to date

Organized financial statements help to tell a good story about your business. If your company is profitable, but your books are a mess, it will reflect poorly on the value of the business and how it is run. Additionally, if you enter the sale process with incomplete financials, you will not be prepared to present them to buyers. This takes away momentum from a deal and often causes investors to lose interest. All your financial records should be complete and transparent. Using industry standard accounting software will make it easier to export the reports and share them with interested buyers.

Review all contracts and agreements

In addition to financial documents, you must make sure all of your other business documents are in order. This includes making sure all your business operations and processes are well documented and up to date. Doing this ensures that management, employees and future owners will know how to run the business in your absence. Address any regulatory or compliance issues, and update corresponding documentation. Review all of your employee and vendor contracts as well as leasing agreements to ensure everything is current. If you have a real estate lease that is set to expire, it would be a good idea to talk to your landlord about negotiating a new agreement with terms that would seem reasonable to buyers.

Have a growth plan

Having a plan for how you want your company to grow can help boost your valuation and make your business more attractive to investors. It isn’t much more than just an idea though if you don’t put it on paper. If you don’t already have a growth plan, put a formal one together. Consider your long-term vision for the company, as well as ideas for expansion and ways to diversify your income or customer base. This gives buyers a vision or starting point for where they can take the company if they decide to purchase it.

Preparing to sell a business is a complex process and cannot be done on a whim. If you want to get the return on investment you deserve, you must put in some prep work. It is so important to get an outside perspective when doing your preparations. You may know all of the inner workings of your business, but you lack the ability to look at it 100% objectively and see it from a buyer’s perspective. Being able to maximize the value of your business starts with building the right support system with knowledgeable advisors.

Understanding how to prepare your business for sale is just one aspect of the sale process. Creating an exit strategy, protecting your confidentiality, qualifying buyers and negotiating terms are all critical parts of the puzzle. If you are looking to sell a business in Fort Myers, Sarasota, Naples or any other part of Southwest Florida, don’t do it alone! The smallest mistake could be very costly, so you want experience on your side. Corporate Investment Business Brokers (CIBB) has been working will businesses of all sizes and from every industry since 1986. We can offer you the proper guidance to get you through the entire process, including the prep work. Our process begins with discovering what your business is worth. Contact us for a free, no-obligation business valuation estimate.