There is an essential element of business ownership that frequently gets forgotten by many seasoned business owners – preparing their business for sale.Why do you want to be prepared to sell your business? Simply, being prepared adds tens of thousands of dollars to the value of your business. Lets take a look at a few simple things you can do today that will, over time, increase the value (and saleability) of your business.How dependent is the company on you personally?Can your business function without you? Do customers ask for you personally? Great value is added to a business who’s operation is not dependent upon the owner both from a buyers perspective and from a lenders perspective should buyer financing be required.How do you remove yourself from being integral to the business? There are several solutions from delegation of duties, creating processes and procedures to hiring a sales team and administrative staff. Start working at promoting the business and remove yourself from being integral to the day to day operation of the business.Do you have a business plan and marketing plan?Both Business and Marketing plans are critical documents to any business. These documents do not have to be complex. Unfortunately few businesses have these documents and even fewer actively maintain these documents.The business plan is commonly thought of when financing is required however it should be a document that is frequently reviewed. Software is available that can help you create and maintain a Business Plan.The marketing plan is essential to every business. Indeed, marketing can easily be a full time job in itself. I’ve seen businesses of all sizes with no marketing plan, all suffering from the illusion that customers and clients will simply pour through the door for product and or service. This attitude is typically the down fall for many a business. Do not underestimate the power of the marketing plan. Consider structuring your business to include an expert who can help you in this area.Do you have an operations / procedures manual?I was in a restaurant the other day and in the kitchen was a monitor above the prep table. Anyone in the business, could make a meal by pulling up the step by step instructions on the monitor – which included photos! The point is consistency even if key staff are absent.
Start creating an operations / procedures manual from the perspective of how to run your business, (based on the above example of preparing a meal, step by step). Your manual will then allow your staff complete mission critical activities consistently by following step by step instructions.Your EmployeesYou need to ask yourself some tough questions regarding your employees. If you do not, a savvy buyer will. Are all your employees critical to the operation of the business? Are they all pulling their weight? Certainly if there are one or two that are not, it is better to address these issues now before the sale of the business starts.Start cross training your employees, creating traditions and even implementing a long term incentive program. Each of these areas creates loyalty, significantly improves employer / employee relationships but most importantly, increases the value of your business.Financial StatementsAccountant prepared financial statements are important to have on hand. For any potential buyer, do take the time to explain any abnormal occurrences such as drops in revenue and any increases in specific expense items.Having your accountant prepare Notice to Reader financial statements are acceptable for some businesses but if you are considering selling, I would recommend your accountant prepare a Review Engagement financial statement instead. The reason is a Review engagement is viewed as being more credible than Notice to Reader financial statements. Certainly in this day and age, should a buyer be in need of financing, many lenders will only approve loans based on Review Engagement financial statements.