How to Prepare Your Company for Sale

Generally, the largest asset that a business owner has is his or her business. The business owner spends all of their waking (and sleeping) time determining how to grow that business to get it to the next level, sometimes hoping that one of their children would like to take it off their hands, giving the business owner a fair return for their investment of money and time in the business. Having one of your children step into your business is not a sure thing. Think of all the business owners that you know and take an educated guess at how many of their kids have an interest in taking over the business, or actually do.

This is why this topic is so important, as a business owner needs to operate their business with flexibility in mind. It is possible that one or more of your team members would buy your company someday. Alternatively, it is possible that an unrelated outside company may have an interest. A supplier might have an interest. You could sell it to your team through use of an ESOP. A private equity firm may be interested in acquiring your company to combine with another company with similar product lines.

There really is no way for you to know who will buy your company someday. The other thing that you cannot predict is knowing why and when you will be selling the company. It could be someday in the future when you just want to retire. It also could be at a time that you are disabled, or worse, when you die. You might even just want to get into something else at some point.

The problem with not knowing is that it seems like you have to prepare for everything to protect yourself. That may seem to be the case, until you realize that the base planning for all these reasons for sale and who will buy is the same. The thing is – it does require planning, and planning requires time. If you don’t plan and give time for the planning to work, you will not be able to command the price that you want, and you and your family may not be adequately protected in the process.

As part of your planning, keep it simple. Here are some simple items that you can do over time to get ready or be ready for the unexpected:

1. Determine an approximate amount of what your company is worth. Remember that the business owner always thinks that the business is worth more than it is. Find a great valuation company who can evaluate it and give you a rule of thumb to go by. Determine from your valuation company what the factors are that will give you a better price when you sell and incorporate those factors into your plan.

2. Prepare a strong vision statement of where you want to take your business to. Determine if your current team are the right leaders within your company to help take the company there. Go over this with your team frequently.

3. Build a good organization chart and see who many seats that you occupy. Decide which seat you should occupy and start finding people who are better in the remaining seats than you.

4. Stay in your lane. The tendency may be to slip back into your old ways where you had to do everything, but resist that, as you will not keep great talent unless you give the talent the ability to lead.

5. Prepare a what-if scenario for yourself as a precursor to writing out an exit strategy. What if it is five years from now and you want to move to a warmer clime? What if you become disabled, what should happen and who should lead? What if your team approaches to buy out part of your interest? What if you pass away—who would you like to see the company owned by? Think about all the possibilities and just mark down the answers that you see to those questions today.

6. Prepare a list of potential buyers of the company that should be approached to buy your company, is something should happen to you before these steps are in place. This will give your family a chance at obtaining some fair value for your interest.

Remember that you need to start this planning at least five years before you anticipate needing to proceed in order to have the best outcome, so start now!

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Denice Gierach

Gierach Law Firm

Denice Gierach is an attorney, CPA, Northwestern University business master's graduate, and has owned several businesses from real estate to manufacturing. She is the lead attorney at Gierach Law Firm in the Chicago area. With more than 30 years of experience, she has been a respected and sought-after resource for businesses looking to grow, sell, solve problems, and succeed long term. Her insights across business areas gives a fuller lens to business issues and solutions, and helps businesses grow and succeed with less time spent on legal issues and other time-consuming problems.

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