I want to retire in a few years. What do I need to do to prepare the business for sale?

I want to retire in a few years. What do I need to do to prepare the business for sale?

Question:
I want to retire in a few years. What do I need to do to prepare the business for sale?

Answer:
Many owners make mistakes in selling their businesses. They create a business that is too dependent on the owner for its operation and profitability. Buyers and lenders recognize the owner is the business and when the owner leaves the business will be worth a lot less. The buyer won't pay full value. Start now to delegate and prepare your key employees to run the business after you're gone. Other owners set an unrealistic price for the business based on the income they need to maintain their lifestyle in retirement. That's not likely unless the business owns a lot of assets with high market value. Get a realistic appraisal for the business and adjust your retirement expectations accordingly. Don't use unqualified family members who are attorneys and certified public accountants to assist you in the sale. Select advisers with experience in mergers and acquisitions. Selling a business is a complicated process. Poor advice can cost you a sale.

Get your financial statements including balance sheet, profit and loss statement and cash flow statements in good shape. The prospective buyer will want to see financial statements for the past three years certified by a certified public accountant. It's difficult to reconstruct financial statements retroactively and it's unlikely a certified public accountant will certify them retroactively. The same applies for the business's tax returns and bank statements. The prospective buyer will have their certified public accountants review all those documents carefully to detect any red flags that indicate the business is not as profitable as shown.

If you have a business that is likely to grow and be worth more than $5 million at the time of sale and plan to give part ownership to relatives, consider doing it now and let it appreciate in the relative's name. That will minimize gift taxes. Don't rush the choice of a buyer because the initial price seems best. After due diligence the buyer may lower the offer considerably. They may not be willing to keep key employees or the financing may be too risky. In the meantime you have lost other better buyers.
Don't underestimate the emotional trauma of selling the business. Often the owner's sense of self worth and purpose in life is tied to the business. Their business and social status in the community depends on the business. Giving that up can be more emotionally traumatic than they expect. That can cause them to act irrationally and do damage to the sale, their lives and their family life. Set goals for what you want to do in retirement. Before I retired I set seven goals that would keep me busy. Consider doing part time consulting to fill your time and keep you connected with your industry and business community.

Read: How to prepare to sell a business

For a complimentary consultation:
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com