Selling Your Business in the Future? Prepare Now!

Building a successful business can be a long and tiring undertaking, but once you see the empire growing you might be looking for ways to exit and enjoy the fruits of your labor in a more relaxing environment.  To that end, selling your business can be a wonderful way to cash out and enjoy the freedom you deserve.  When you do sell, I would hope your goal is to maximize the amount that you receive – otherwise you are leaving money on the table.

When you get close to that point where you are ready to sell, you should be looking at how you can get your house in order.  I chose those words carefully for a reason – for selling a business is no different than selling a house.  Businesses, like houses, may initially look grand and inviting, but once you start investigating all the nooks and crannies you find there are many cracks – some cosmetic and some that could bring the entire foundation crashing down.  This is why it is imperative that you invest money into performing a sell side diligence before you even begin to look for potential suitors.

So what exactly is a sell side diligence?  Essentially, it is an inspection of everything that makes up your business with recommendations on how you can get it prepared for sale.  Experts will look at every detail, from financials to technology, customers and clients, inventory, logistics, and more trying to find out, before the buyers do, what is wrong and how to fix it – and they WILL find problems.

The good news is that most problems are cosmetic and repairable or are worth leaving alone and taking a small hit on the final purchase price.  The expert consultants that do these projects can give you estimates on what it would cost to correct, the potential impact on a sale, and, in their best experience, whether you should or should not perform the repairs.  Sometimes, they will even have the resources necessary to aid in the work making it a seamless transition.

I bet you are thinking to yourself that it is not worth the costs – for these projects are more speculative.  You do not have a prospective buyer yet, you do not know how much you can bring in, and now someone is telling you to pay good money to see what “may” be wrong with your business.  As someone who has spent countless hours helping the buyers find the same mistake to help them lower purchase prices or avoid acquiring businesses where the foundations may be ready to crumble, I will tell you that you should invest in this kind of work.  It is far better to be prepared, fix the issues, or be ready to immediately respond when we find problems.  We, the buyers and their diligence team, look more fondly on businesses that admit the cosmetic flaws and already have plans in place to repair them.  Not only does it make us believe more in the business, it helps us better value the executive team behind it.  Don’t wait – start looking into it today before you lose millions in value when you do sell.

(note – while this is not an article promoting any one business, I will add that at West Monroe Partners we do perform Sell Side Diligence projects.  If you are interested in learning more, feel free to reach out to me and I will provide you the necessary assistance)