Our work with organizations in a diverse range of industries has demonstrated that many owners are unprepared for the sale of their business. While many may have an awareness of the financial metrics used to value a business, most have not considered the impact that specific operating areas within their business can have on the overall value and final sale price.

Therefore, it is important that a business get its proverbial house in order prior to sale. Ideally, this preparation should begin several months, or even years, in advance of the actual sale. Even if the goal is to sell the business quickly, it’s important to avoid the appearance of a distress sale. As a result, with proper preparation a business that demonstrates strong performance in each of its operating areas including business development, will be much more attractive to potential buyers and command a higher sale price.

Here are a several questions to consider:

What is the first impression of the business? What do customers see when they first visit your business? This may be a physical visit, but it is more likely that the initial contact will be with your website. Does your website accurately represent your business? Or is it something that you put up several years ago and never found the time to update. Do you know how your business is being portrayed in social media? You need to know what is being said about your company. If your business has an office or plant location ensure that the first impression is a good one. We suggest asking an advisor, or someone not connected to your business, to provide an assessment of your business from an external perspective.

Does the business have a consistent record of performance? Has the business continued to grow over the last few years and/or has it maintained its financial performance. A business that is not providing consistent returns will need to improve and create stability before being put up for sale.

The period before the sale is the time to accelerate business activities by developing new customers, increasing marketing and advertising — even introducing new product lines. You want to offer prospective customers a good value. If you slow down operations, you are handing the buyer a negotiating tool.

To maintain healthy financials, it’s important to not only eliminate unnecessary expenses, but to step up collection efforts. Buyers don’t want to see a long list of past due accounts receivable. Plus, if those debts are collected after the sale, you may not see much of the proceeds.

Do you know what the business is worth? Can you provide support to a potential buyer, for example, in the form of a third-party valuation report? A professional valuation of your business provides an objective idea of what you can expect, and will help you gauge the fairness of buyer offers. It can reveal strengths, which will help you market your business, and weaknesses, while there is time to take corrective action. It also helps you to set a realistic asking price and provides support if prospects question your price. If the valuation is less than your expectation you can work with advisors to understand why the valuation is what it is and how you can build the value of your business to a level that meets your exit requirements.

A buyer will likely engage a valuation expert, so be sure you have all of the appropriate information readily available to support their efforts. The first thing a buyer will ask for is your financial statements for the last several years so ensure your company’s statements are reviewed or audited by your accounting firm.

Can you articulate your reasons for selling? Prospective buyers will want to know why the owners are selling now. Perhaps you want to retire or move on to the next stage in your life. Maybe the operation needs a new team to take it to the next level. Whatever the reason, make sure you can articulate it since buyers naturally think: If the business is so great, why are you selling?

Do you have the right team in place? One important asset you’re selling is the employees who work at your company. Is your team properly trained and is there a winning company culture? Examine non-compete agreements that you may have with employees from the standpoint of a prospective buyer. In addition to the employees, keep in mind that you are also selling your customer base and relationships with vendors that took time to build.

Have you considered how the sale should be structured for federal tax purposes? The tax consequences can vary widely depending on how long you’ve owned the business, the type of entity and exactly how the deal is structured. (Ie. Is the transaction a sale of shares of a sale of net assets?) By planning ahead with your tax adviser, you may be able to substantially reduce the tax bill.

Have you documented all of the company’s processes, procedures and liabilities? Do they accurately detail how the business performs on a day-to-day basis? You should also have important paperwork readily available, including permits, licenses, incorporation papers and existing contracts. What about outstanding leases, debt and other liabilities? And get a handle on how your company’s employee benefit offerings (pensions, health insurance, etc.) will affect a sale.

What will you tell employees, vendors, and shareholders who may hear about a proposed sale? Controlling rumors is very important in terms of keeping the company operating at peak performance. Sign a confidentiality agreement with the parties so that information isn’t leaked out. And be prepared for announcing the sale appropriately. This needs to be a managed process.

Who is the ideal buyer for the business? Specifically, what attributes does the buyer need in order to complete the acquisition and successfully operate the company? Has anyone expressed interest in the past? Are those individuals appropriately qualified to make the purchase?

What role do you wish to have after the acquisition? Do you want a consulting contract or position for yourself and other employees? Further, what level of income do you need to support your current lifestyle as well as your personal goals once the business is sold?

Most business owners have spent years building their business. When it’s time to sell the goal is to receive the maximum after-tax price and getting to that price does not happen by accident. It requires careful planning and an understanding of all of the value drivers of a business. So if you are considering selling your business, start the process now and engage trusted advisors to ensure you receive the professional insight and guidance you need to structure the best possible sale price and after tax return.