According to Entrepreneur.com, there are 10 things you should do to prepare your business for sale. These steps are shown as follows. It should be understood that although the sale of a business often takes a year or more, the earlier you take these steps the better.

1. Get a business valuation.

One of the first things you should do is get an opinion as to what the value of your business is. Although business valuations are inherently subjective, a realistic estimate will help to eliminate surprises later on and may give guidance as to how the value can be enhanced.  

2. Get your books in order.

Buyers evaluating your business normally look at 5 years of annual financial statements and the latest interim financial statements. Audits are better than reviews and reviews are better than compilations. Clean books give buyers more confidence that what they see is what they’ll get.  

3. Understand the true profitability of your business.

Most closely-held businesses have discretionary expenses that could be eliminated by a buyer. Make sure you have supporting documentation for these expenses so they can be considered by a buyer when price is being determined. For example, your business may be paying you at levels that are higher than necessary. In addition, there may be non-recurring expenses that should be eliminated from the income being converted into value.  

4. Consult your financial advisor.

You should talk to your tax advisor in order to understand the tax ramifications of the sale of your business and your options with regard to deal structure.  

5. Make a good first impression.

When a potential buyer visits, you should be able to make a good first impression. Just like when selling a house, looks count.  

6. Organize your legal paperwork.

Having your paperwork organized and in order will give the buyer more confidence that everything is in order.  

7. Consider management succession.

One of the major risk factors of a business is the loss of its key management. There should be a plan in place for successor management.  

8. Know your reason for selling.

Buyers always want to know why you’re selling. They don’t want to buy a business that is going downhill, so be prepared to state why you want to sell.  

9. Get your advisory team in place.

You should have a team consisting of at a minimum an attorney, an accountant and an intermediary who are experienced in mergers and acquisitions. In that way, when an offer is made, you can respond quickly.  

10. Keep your eye on the ball.

Don't let your business decline because you're too focused on the sale of your business. Buyers are risk-averse and like to see the business in an up-trend.  

• Wood v. Wood (filed 11/29/11)
  
  
• Short v. Short (filed 10/25/11)
  
  

• "Recent Developments Concerning the Estate Tax Inclusion of Transfers to a Family Limited Partnership", by Brent B. Nicholson, 26 Akron Tax J. 42, 2011
  
  
• "The Importance of Proper Valuation in Transactions Between an ESOP and the Selling Owner", by Sam J. Totino, 6 Entrepren. Bus. L.J. 361