You only sell your business once, so you've got one chance to get it right. You don't want to regret selling your business for less than it's worth due to poor preparation.

Planning the sale of your business

Ideally, you will begin to prepare your business for sale well before you put it on the market. You want to ensure your business is represented at its best and show prospective buyers the benefits of buying your business. It could be as simple as making sure your shop floor is clean and presentable, or getting your financial statements ready.

Make yourself redundant

Make it easy for a buyer to step into your role. If you have all the knowledge and skills to run the business, the buyer's greatest fear is that the business will walk out the door when you do.

Document the policies and procedures that exist as unwritten rules. It is advisable to systemise the various functions of your business and create a procedures manual. Any buyer will then be able to operate the business without the need to rely on you.

Each employee should have a documented clearly defined role, and a designated set of tasks and procedures which leads to measurable and desired outcomes.

Business relationships

It also helps to document the relationships which are key to your business. Convert any verbal agreements with suppliers and clients into written agreements wherever possible. Written agreements will make your business look stronger and build confidence in potential buyers. Examine existing contracts with suppliers and customers to ensure they will not expire or require renegotiation just as a new owner steps in.

Business makeover

Similar to selling any other valuable asset such as your home, there are several practical steps you can take to create a good first impression to a potential buyer. You will improve the perception of value to the buyer and may increase the price you can ask for your business.

• Inventory – sell all obsolete or slow moving stock items. This will improve both your sales figures, and eliminate disputes about the value of inventory during the sale.
• Plant and equipment – sell any redundant or obsolete plant and equipment, machinery, spare parts, and scrap that are no longer required.
• Business premises – look at your premises with the eyes of a potential buyer. Clean up, maintain, and paint the premises where necessary. Ensure the premises comply with all regulatory requirements.
• Employee – ask your staff to take their leave and other entitlements prior to the sale, otherwise the sale price may be reduced by the value of their entitlements. Retaining key employees after transition to the new owner may be important for a successful sale, so determine which employees are prepared to stay with the business.
• Commercial premises leases – Review business premises leases and ensure the lease does not expire or require renegotiation during the time when you plan to sell the business.

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Business financials 

Ensure your financial records are up to date to clearly demonstrate the true profitability of your business to a potential buyer.

• Debtors – collect all payments that are overdue from your clients. Potential buyers may be discouraged about buying a business with clients who take a long time to pay their accounts.
• Creditors – ensure you are not late with payments to your suppliers. This will create a positive impression of the financial strength of your business.
• Produce monthly profit reports to demonstrate to your buyer your ability to monitor and manage the performance of your business.
• Prepare audited financial statementsso the potential buyer is confident of the financial performance and value of the business.

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Prepare a buyer's information pack

Buyers will be working through their own due diligence process and will want to know exactly what they are getting for the purchase price. It's a good idea to prepare information packs for genuine potential buyers.

When selling a small business, obtain professional financial and legal advice to prepare the required information and documentation and to ensure you comply with the requirements for a valid sale.

For more information about what a buyer will be looking for go to Buying a Business.

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What's next…

• Step 3: Setting the right price
• Step 4: Making the sale

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