How to Prepare Your Business for Sale
By Stuart J. Oberman

Selling a business can be the largest and most important deal of an entrepreneur's career. Whatever prompts the sale - illness, age, partner disputes, financial hardship - selling your business is a high-stakes transaction, with far-reaching financial and emotional consequences.

In the best of all worlds, the owner begins to prepare his or her business for sale at least one year, and preferably three years, in advance. The owner should begin by assessing the financial books with an eye towards creating a financial statement that will illustrate the company's revenue and growth potential.

The records should be formalized so that a new owner can take over with minimal training. Eliminate idiosyncrasies: If an owner of a business has similar vendors or customers who are receiving different payment terms, or if an owner has played favorites with friends and relatives, an owner should try to establish unilateral rules.

In addition, a business owner should examine all supplier and customer contracts. Make sure terms and conditions will not expire or require renegotiation just as a new owner takes over. Terminate contracts that might trouble a potential buyer or that may drain the company financially.

An owner should put in writing any company policies and procedures that exist as unwritten rules. If necessary, create a procedure manual that will document the best way to run the business.

An owner should also review all real estate leases. If a business is tied to a particular location, make sure the lease does not expire or require renegotiation just before the sale of the company is anticipated. If the company's location will discourage buyers, then consider moving the location before the business is placed on the market for sale.

Furthermore, an owner should evaluate and catalog company assets, from property to warehouse inventory. If you delayed investing in computer upgrades designed to manage and control the flow of inventory, now is the time to modernize. No one wants to buy a company that's rooted in the dark ages.

Finally, don't forget about your employees. The loss of key employees during a sale can kill a deal. Key employees may be crucial to the new owner's success, so it's important to determine which employees are prepared to stay with the company during and after the transition. It is important that your employees hear about the pending sale of the company from the owner and not a third party.