Preparing to sell your business is to some extent like preparing to sell your house: it comes down to appraising your asset from the viewpoint of a prospective buyer and making it as attractive as possible, inside and out.
What you don’t get with a house, however, are employees, customers and a trading history of profits and losses.
To illustrate the principles below, let’s assume you’re the owner of a small, successful grocery store in a great downtown location and you’re getting ready to sell.
While it may not seem like an important factor compared to profit and loss statements or balance sheets – and indeed any deficiencies are easier to remedy – the physical appearance of a business can have a big impact on its perceived value and appeal to buyers.
In the case of our neighborhood grocery store, we recommend taking the following steps to boost the appearance of the property inside and outside:
1. Do a thorough cleanup of any trash or redundant clutter making the premises look untidy.
2. Have the front windows professionally cleaned and replace any worn signage on the windows, door or frontage.
3. Keep the entrance neatly swept and shovelled if there is snow.
4. Tour the interior and make note of any imperfections you notice – stained ceiling tiles, stained floors, bent shelving, broken tiles, noisy conveyor belts at checkout, tatty cash register – and arrange to have them fixed.
5. Thoroughly clean the interior, preferably using a professional service, and repaint the interior.
6. Keep shelves well stocked at all times.
7. Ensure your staff uniforms are all clean and presentable and educate staff on how to keep the store on top form in case prospective buyers visit.
The above measures may cost you a few hundred dollars, but they could secure a quicker sale and put several thousand dollars on the sale price.
Make sure all business records and legalities are in order
As noted previously, the business records, financial statements and other legal matters involving the business are an important part of any buyer’s decision-making process. Whatever information they might request, you should have it readily available and easy for them to access.
Going back to the neighborhood grocery store, we recommend working with professional advisors (lawyer, accountant, business broker or real-estate broker) to check the following important items off your list:
1. Put together clean copies of (or provide electronic access to) necessary financial business records covering the previous three fiscal years. These include P&L statements, balance sheets, tax records, bank records and any other additional records that tell the store’s financial story.
2. Review all current contracts involving the premises, suppliers, contractors and employees to ensure all are up to date and transferable and that you’re familiar with all particulars. If adjustments are necessary prior to the sale, take care of them quickly.
3. Put together a realistic financial forecast based on past and current performance that provides a glimpse of what the new owner can expect to earn from the business in the next year or more.
4. Review all legal records involving the store, such as inspection reports, previous or ongoing lawsuits and judgments, zoning approvals and any appropriate licenses required to operate in the location. Ensure they too are up to date, transferable and in order for review.
Set up the business to run without you
If a prospective buyer can’t imagine the business thriving in your absence, then they won’t buy it – simple as that. No matter how much you, as the current owner, enjoy your day-to-day involvement, you need to prepare the business for life without you and reassure the buyer that they can slip seamlessly into your role.
As you prepare to sell that corner grocery store – or any other food retailer – here are a few recommendations for helping the buyer see themselves as the future, successful owner:
1. If you haven’t already, hire a competent store manager (or managers) who are willing and able to run the store effectively without you micromanaging them.
2. Instruct staff and management alike to contact you whenever absolutely necessary, but to feel comfortable running things without your direct approval at every turn.
3. Remove yourself financially from the business if you have not already: pay yourself like you do any other employee, authorize others to sign checks and make deposits if appropriate, and – if necessary – rename the store to remove your personal name.
Follow these three basic preparatory steps and you’ll make your business more attractive to prospective buyers and give yourself the best chance of a smooth and profitable sale.