Like most things in life, a little preparation goes a long way. That’s absolutely true when you are planning to sell your business in the next 2 to 3 years. The following list is born out of my experience in a multitude of transactions.

1. Get a business valuation. One of the first things you should do is obtain a realistic idea of what your business is worth from an objective, outside source.

2. Get your books in order. Buyers evaluating your business generally require at least three years worth of financial information. The more formal your statements (accountant reviewed or prepared vs. internally generated), the better the impression you’ll make.

3. Understand the true profitability of your business. Most privately held businesses claim a variety of nonoperational expenses. Make sure you have supporting documentation for these expenses. In addition, there may be infrequent expenses you have incurred during the past three years that should be excluded from a buyer’s analysis of recurring cash flow.

4. Consult your financial adviser. It is wise to speak with your tax adviser for help planning your financial future. Understanding your personal and corporate tax situation may also help you recognize your options regarding deal structure.

5. Make a good first impression. Will a buyer visiting your shop for the first time see order or chaos? Buyers look for companies that show well, as an orderly shop is often indicative of an orderly management team and operations.

6. Organize your legal paperwork. Review your incorporation papers, permits, licensing agreements, leases, customer and vendor contracts and make sure they are current and in order.

7. Consider management succession. If you’re vital to your business, who will a buyer turn to for help running the business after you leave? You should have a succession plan in place before going to market.

8. Know your reason for selling. Buyers are always curious as to why a seller wants to exit a business. Be prepared to articulate your reasons.

9. Get your advisory team in place. Start interviewing attorneys and accountants that are proficient in mergers and acquisitions. Hire an industry specific intermediary to represent you and help you through the selling process.

10. Keep your eye on the ball. Don’t let your business performance decline because you’re too focused on the sale. This will only give buyers additional negotiating power and lower their offers.

Written by Mike Kelner, Certified Business Intermediary and owner of VBB Advisors [email protected], (704) 942-4621