Five Steps to Prepare for Your Sale
If you are a business owner nearing retirement, you’ve likely dedicated the last 30 to 40 years of your life to making your business a success. It can be difficult to focus on a plan for retirement when you’re used to spending your days working with employees, helping customers and putting out daily fires. However, taking time to carefully plan for the succession of your business can significantly improve your ultimate sales price.
The best time to begin the succession/exit planning process is three to five years before you intend to sell. Consider using this time leading up to retirement to work through the following steps.
Step #1 – Improve your financials
In the three to five years leading up to the sale, try to increase your gross margins by 1% each year while simultaneously decreasing your expenses by 2% each year. The improvement in your finances will make your company more valuable to potential buyers, resulting in a higher sales price.
Step #2 – Clean up your records
The next step is to clean up your financial statements and other records. Potential buyers will want to review two to three years of tax returns and finances. Be sure to remove any unnecessary entries, including loans to or from shareholders that have been paid off.