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Vanessa Grimaldi headshotBy Vanessa Grimaldi, Vice President and Business Development Manager at Byline Bank

As a dedicated entrepreneur, you are well aware of the sweat, tears, and sheer hard work it takes to transform a business idea into a thriving reality. However, as your small business grows, you may find yourself contemplating the next strategic move for your company’s future, including the possibility of selling it. Selling a small business can be an overwhelming task that requires careful planning and preparation. But fret not, as we are here to provide you with all the essential information needed to navigate this process successfully. In this article, we will outline seven vital steps that you can take to effectively plan ahead for a triumphant sale of your business.

Step 1: Review financial records

It is essential to review your business’s financial records—including income statements, balance sheets and cash flow statements—before selling your business. Knowing the financial health of your company will help you to better understand how much it is worth, as well as identify any issues that may arise during the sale process.

By thoroughly inspecting your records, you can ensure that all information is accurate and up-to-date, which can ultimately increase the value of your business in the eyes of potential buyers. Additionally, having a clear picture of your company’s finances allows you to be prepared for due diligence when buyers come knocking. This not only increases the chances of a successful sale but also helps to protect you from any potential legal repercussions.

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Step 2: Create a detailed business plan

Creating a detailed business plan before attempting to sell your business is an absolutely essential step. Doing so allows you to clearly outline the current operations, growth potential and competitive advantages of your business, giving prospective buyers an in-depth perspective of what they can expect to gain from their investment. It also serves as a roadmap for your company’s future success, providing clarity on the direction your business is headed and outlining strategies for overcoming any obstacles that may arise.

Furthermore, having a comprehensive business plan will demonstrate that you have done your research and are prepared to prove that you are offering a sound investment opportunity. By taking the time to thoughtfully craft a detailed business plan for your business, you stand to show potential buyers that you are professional, knowledgeable and serious about selling your business—all qualities that will help increase their confidence in the purchase.

Step 3: Identify and address potential issues

It is important to identify and address any potential issues with your business before attempting to sell it. If there are any outstanding debts or liabilities, lawsuits or other compliance issues that you are aware of, they must be addressed prior to listing the business for sale. Failing to do so can result in problems during the sales process or even make a sale impossible.

Having a lawyer or accountant review your legal and financial records prior to putting your business up for sale will ensure that any issues are identified and addressed ahead of time. Taking this additional step will also help you feel more confident when discussing the sale of your business with prospective buyers, providing them with assurance that all necessary paperwork is in order. Ultimately, taking precautions to identify and address potential issues upfront can help streamline the sales process, ensuring that you get the best possible return on your investment.illustration of marketing collateral

Step 4: Prepare marketing materials

Preparing marketing materials is essential for underscoring the value of your company and getting top dollar. Brochures and webpages are important tools in this process as they provide your potential buyers with all the necessary information they need to make an educated decision. They also allow you to highlight the strengths of your business, such as any recent successes or innovations you have made, while keeping potential buyers informed of the unique selling points that set your company apart from its competitors.

Step 5: Find a business broker or a mergers and acquisitions (M&A) advisor

Hiring a business broker or an M&A advisor to help you with the sales process is essential for any business owner who is looking to maximize their returns. Not only can these professionals provide invaluable insight when it comes to the marketing, negotiation and legal aspects of selling a business, but they can also provide invaluable guidance throughout the entirety of the sales process. With their specialized knowledge and expertise, a broker or advisor can ensure that all details are accounted for iso that you can obtain the best possible outcome from your sale.

Additionally, brokers and advisors have experience in dealing with buyers and have access to networks that may not be available to business owners. This allows them to facilitate faster sales and better connect potential buyers with sellers. Finally, these experts are able to take much of the burden off the seller by handling all associated paperwork as well as helping to manage negotiations between parties. All of this ensures that the seller receives top dollar for their business while minimizing any associated stressors along the way. So if you’re looking to make sure you get the most out of your sale, then hiring an experienced broker or advisor should be at the top of your list when it comes time to sell your business.

illustration of a bank building

Step 6: Consider pre-qualifying for seller financing

Before officially putting your business on the market, you might even consider reaching out to your bank to see if your business can pre-qualify for seller financing. Not only does pre-qualification provide a potential buyer with peace of mind, but it could also help the seller to have a more predictable and streamlined sales process. Additionally, pre-qualifying your business ahead of time helps to ensure all financing documents are in order prior to closing the sale (remember step 1?), freeing up valuable time and resources throughout the sales process.

By partnering with a financial institution that you trust, you can take advantage of their expertise and guidance along the way, as well as gain access to specialized loan products designed specifically for business acquisitions. Pre-qualifying also eliminates any risk associated with not being able to secure financing post-sale, which provides both parties with greater security and confidence. Ultimately, pre-qualifying your small business before listing it on the market is highly recommended if you want to make sure you get the best return possible when selling.

Step 7: Determine the asking price

It is important to determine the asking price of your business before attempting to sell it for several reasons. First, setting the right price helps you maximize the value of your business and create a profitable transaction. Accurately assessing the worth of a business involves understanding its financial performance, growth potential and other factors that may influence its value. A proper evaluation of these variables aids in setting an appropriate asking price and increases the chances of achieving a successful sale.

Additionally, determining an accurate asking price before attempting to sell helps establish credibility with potential buyers. By providing evidence-based insights into the worth of your business through valid valuation techniques, you can demonstrate that your asking price is fair and competitive. Finally, having a clear understanding of what you expect to get from selling your business helps you create realistic expectations regarding timelines and outcomes. All of these benefits ensure that you make informed decisions when selling your business and optimize your return on investment.

Putting It All Together

And there you have it: the seven steps involved in preparing to sell your small business. They may seem daunting at first glance—from gathering financial documents to assessing market value, and the dozens of other minor details in between—but they don’t have to be.

The process of preparing to sell your small business can be an opportunity to find trusted professionals to partner with. Lawyers, accountants, banks: These can all be key players in setting you up for a successful sale. By getting organized beforehand and taking full advantage of the professional services available to you, you can go into any sale armed with knowledge and confidence that you’ll have all your ducks in a row when crunch time finally arrives.

This article was written by Vanessa Grimaldi, Vice President and Business Development Manager at Byline Bank.