Have you been thinking of selling your business? Or maybe dreaming of retiring one day soon but you aren’t sure what’s going to happen with your business? Whether your plans are six months out or six years out, there are things you can do now that will make it easier for you to sell and easier for a potential buyer to choose your business.
First – Know Thy Buyers
If you are a small business owner there are generally a few types of buyers.
1. Someone who is already in your business who wants to take over your operation to expand their own. Generally you’ll find this buyer is price conscious and will be very interested in the facts. Get your P & L’s ready for this guy.
2. The second kind of buyer is a serial entrepreneur. This person may or may not have experience in your industry but they are business savvy. They’ll want to see everything you have to offer and they will most likely be interested in price and how the operation is working.
3. The third buyer is what I refer to as a Dreamer. Usually this is a couple venturing out into business ownership. They may be good at doing whatever it is that they have been doing for work up until now, but they aren’t necessarily great business people. They will have X amount of dollars to spend and they’ll think that they can do anything and will be ready to jump right in. They will absolutely LOVE if you can provide them a “turnkey” operation. The more you provide them the easier it will be for them to say Yes and get the sale started right away.
4. The fourth kind of buyer is an employee who is already under your roof, working as part of your team. This person likely doesn’t have experience as a business owner before, but they’ve secretly always dreamed of being the boss. They already know your business and have a relationship with your customers. Keep your eye open for any star players, you may be able to approach them about taking over the leadership of your company. Typically this can be the easiest transition, particularly if you are open to personally offering them financing.
Start Gathering Data
You know you want to get the most money you can from the sale of your business. Start collecting this data now to help your Buyers get a detailed picture of your progress over the years. Compile the following information into a large 3 ring binder so that when the timing is right to sell you’ll be able to show the new owners how easy it can be for them to step into your shoes.
1. Gather 3-5 years of financial reports
2. A copy of your building lease
3. An Inventory/Equipment List
4. A copy of your Business Plan (if you already have one)
5. A service list for utilities or other service businesses you routinely hire out (think gardeners, cleaning services, pest control, utilities, etc.) Include name of business, contact name if any, phone number & e-mail
6. A list of passwords
7. Start a Sales Binder includes the following:
a. Sample sales scripts
b. Digital files (recordings) of sales calls
c. An outline of how to overcome the most common objections
d. A Price List of all services offered
8. Start a separate Marketing Binder include the following:
a. Digital copies of your logo in all applications (Business Cards, Letterhead, prepped for website, prepped for other collateral, etc.
b. A hard copy or original of everything with your logo on it
c. Your graphic designer’s names and contact info indicating what they have prepared for you
d. a list of vendors who have produced your finished products which include your logo design. If possible include a copy of the last invoice for products purchased
e. a print out of each page of your website (good in case something goes sideways and someone needs to recreate the wheel)
f. A page outlining your investment in your website including what you paid for it initially and to whom as well as what you have paid to make updates. Also include where it is hosted and when your domain name comes up for renewal and where the payments get paid to
g. An outline of anything you are spending money on now to create leads (ex Google ads, Print advertisement, listings in directories, flyers, etc.) Include an estimate of their effectiveness. NOTE: if you are not tracking where potential students heard about you, now would be a great time to start tracking it so you can share what has worked and what hasn’t worked).
h. A List of any Future Marketing Opportunities you either have explored or may want to explore down the line (think trade shows, speaking engagements, advertising on a new website, etc.)
9. Start with a chart of accounts and create a profile of any regularly used vendors, explain what you purchase from them, how often and what you are paying. Also if you have worked out any special arrangements or discounts include this information.
10. Profile your Insurance Coverage and who your contact is from what company and what they cover
11. Any charts or other information you maintain that shows how many students you served in the last 3 -5 years. You want to show growth and consistency
12. Don’t forget the obvious:
a. Your Operations Manual
b. Your Employee Manual
c. Copies of Licenses
d. Your Organizational Chart
e. Lists of past teachers you would recommend
f. Any systems you have documented
13. Gather information that can help you start telling your story.
a. Gather any evidence of good PR – Business awards, reference in articles, accolades or other recognition
b. create a physical book of pictures to document your progress. Include pics of graduating classes, birthdays or other celebrations; gather info about past students to show their successes (this can also be used for sales too).
14. A file of government related docs (anything that you would hand over to a new buyer to help them have clarity about how to comply with regional or national requirements.
In life there are always choices. When you go to sell your business the new owners will also have choices to choose your business or invest in something else. By compiling this information you can make it easy for them to say Yes to you by providing what you have so that it appears your business is a “turnkey” operation that any intelligent individual can run. Whether or not this is the case is another story. Regardless you will be best served to be open and honest and do what you can to help your buyer see how easy it will be for them to step into your shoes and build on your legacy.
Jennifer Martin is Zest Business Consulting’s founder and lead San Francisco Business Coach and Small Business Consultant. She helps small business owners, leaders, and managers worldwide understand how to build thriving companies they love.