The Top 15 Things to Do When Selling Your Business for the First Time

For many entrepreneurs, the decision to sell the business they’ve built from scratch is one of the most difficult and important choices they’ll ever make. Your business is your baby – the product of countless hours of hard work, sacrifice, and perseverance. Letting it go involves immense emotional and financial considerations.

If you’ve decided the timing is right for a sale and to move on to your next chapter, you’ll want to ensure you go through the process with wisdom and care. Selling a business, especially for the first time, involves numerous complex decisions that will significantly impact your net proceeds and future wellbeing. Here are the top 15 things you need to do:

1. Decide Your Ideal Exit Timing Timing is everything when it comes to selling your business for maximum value. Don’t wait until you’re completely burned out or let an expiry on non-competes/leases force your hand prematurely. Look at your financial forecasts, market conditions, industry trends, and personal situation to pinpoint the optimal window.
2. Get Your Books Audit-Ready
   You’ll need your financial records to be impeccable and organized. Even small errors or inconsistencies can raise red flags for buyers and kill deals. Have your CPA conduct a dry-run audit and get your books and reporting systems up to audit standards months in advance of going to market.
3. Obtain a Professional Business Valuation Hire an accredited third-party firm to provide a formal, certified valuation of your business. This eliminates any perception of bias while giving you a credible, supported benchmark value as you enter negotiations. The cost is well worth it to validate your selling price.
4. Identify and Maximize Your Core Value Drivers What makes your business unique, profitable, and desirable? Key value drivers could include proprietary technology, a stellar workforce, powerful brand loyalty, coveted IP, innovative products, or an exceptional market position. Be able to articulate and quantify the specific factors that make your business valuable.
5. Assemble Your Professional Deal Team You can’t go it alone when selling your business. At minimum, you’ll need an experienced M&A attorney to negotiate the sale terms, a CPA to facilitate the finances and tax implications, and potentially an investment banker or business broker to advise on the process and market the opportunity.
6. Get a Sell-Side Quality of Earnings Report This due diligence report, prepared by an independent firm, can accurately substantiate your stated revenue, costs, EBITDA, and earnings claims. The report analyzes nornalization adjustments, working capital requirements, capex needs, and other key operational drivers. Buyers will want to see this.
7. Spruce Up Your Business’s Appearance Be sure your physical facilities and entire operation looks clean and polished for buyers. Fix any deferred maintenance issues. Update websites, branding, marketing materials, etc. You want to portray a turnkey, highly desirable business.
8. Prepare a Comprehensive Electronic Data Room Collect all of the records, files, proformas, agreements, and documentation a buyer will want to scrutinize during due diligence. Get it all organized and digitally accessible in one secure data room. Having this ready in advance accelerates the process.
9. Plan for Employee, Client, and Customer Retention How you communicate the ownership transition and retain your key relationships will directly impact your valuation and goodwill. Have retention plans/incentives developed for employees, clients, and major customers. Buyers want certainty these key assets will remain on board.
10. Weigh Asset vs. Equity Sale Structures There are differing legal, tax, and operational nuances involved in structuring the deal as an asset purchase versus an equity purchase. With your advisors, determine which structure will be optimal for your goals and situation.
11. Understand and Plan for All Tax Implications The way your sale is structured, the assets involved, potential depreciation recapture taxes, your basis in the business, whether you receive an earnout, etc. – all of these factors demand careful planning to legally mitigate your tax burden. Don’t wing this.
12. Vet Potential Buyers Very Carefully Not all buyers are created equal. They have differing strategic motivations, integrity levels, and visions for your company. Make sure you deeply understand your finalists and only proceed with those who you trust will be good stewards of the business you’re letting go.
13. Map Out Your Transition Period Well in advance, decide if you want a complete separation or if you’ll stick around in some capacity for a transition period after the sale. Quantify the time commitment and get it specified in the deal terms.
14. Protect Yourself with Optimal Deal Terms In addition to the final sale price, there are many other deal terms and provisions to evaluate such as asset/liability baskets, earnouts, noncompete agreements, employment contracts, and more. These impact your ultimate net proceeds and risk exposure. Negotiate them meticulously.
15. Have Your Personal “After Plan” Well-Defined Selling a business you’ve spent years of your life building is an emotional and grueling experience. As you go through it, make sure you have very defined personal plans for how you’ll spend your time and new-found wealth after the sale. Having this clarity will make navigating this major life change much easier.

There’s no denying it – selling the business you’ve nurtured from day one is one of the most significant undertakings you’ll ever go through as an entrepreneur. But with careful planning, attention to detail, and the right team of professionals advising you, you can successfully navigate this process while maximizing your financial return and confidently passing the baton to the company’s new leadership.