Tips to make your business easier to sell or transfer to heirs or employees

If you are going to one day sell or transfer your business to heirs or employees via an E.S.O.P., then you need to consider factors that will make the business easier to transition to a qualified buyer or even your heirs.

Here are 10 tips to consider.

#1.  Have a good lease that is reasonably assignable.  If your lease is a problem, then renegotiate it.  Difficult leases are a non-starter for good buyers, they don’t want an albatross on their neck.  Fix the problem ahead of time, even if you are not nearing the end of a term, you still have options to renegotiate.  If you are having no luck with your landlord, we help renegotiate lease terms.
#2.  Keep good books and records.  Yes, this means the obvious, report all of your income, but, there is more to it.  Keep detailed records of customers purchase history, when they order, how much they order, and how quickly they pay.  For retail businesses, track sales by time of day, week of day, by sales associate, etc.  Also, keep track of your own purchasing history with your vendors.  All this data can be used to gain insight into the operation of the business, which can be adjusted to take advantage of trends.  Play to the strengths of your business and it’s customers.  Buyers like to analyze data for, and so should you!   Like they saying goes, Knowledge is half the power.
#3.  Accounts payables should be on time.  Keep them on time, or the buyer will inherit the problems you likely have created with the vendors.  This might lead to the buyer being put on C.O.D terms, which are real strain and drain on working capital.  Pay people and companies on time, it leads to good will in business relationships that you can count on in times of need, such as rush purchase orders.  Again, this makes transitions much smoother.  Also, with vendors, be sure to renegotiate terms and prices.  This is especially true if it has been a long time since you last negotiated pricing.  Commodities prices change all of the time, and we’ve seen many buyers come in and renegotiate with vendors and reduce the purchasing prices, which reduces Cost Of Goods and thus increases the PROFIT MARGIN.
#4.  Account Receivables should be on time too.  If you have customers that are paying late, they might not be good customers as they are a default risk and a resources drain by requiring collection time and effort and taking away your time to service good customers and attracting new customers.  Buyers aren’t in the collection business, and neither are you.
#5.  Create a structured system for the employees to operate.  This increases accountability and productivity for you.  An added bonus of making the business easier to transition to a buyer, since it makes leading the employees simpler.  This could be accomplished by work manuals, written procedures, management directory trees, etc.  Just do it now, as you’ll reap the benefits as well.  This is important in minimizing employee turnover, which again is a huge drain on productivity.  Buyers like to see stability in a business, as they will be more dependent on employees than you are, due to them having less experience than you.
#6.  Take care of any claims, whether they are insurance claims or customer warranty claims.  Buyers will discover these issues during Due Diligence, and you will look bad, and damage the terms you can justify for the business.
#7.  Keep the equipment in good working condition.  You may get by with some equipment underperforming or non-performing, but it looks bad to a buyer.  If you don’t need the equipment, sell it off and reinvest the proceeds back into the business.  If the equipment is kept for salvage parts purposes, then tidy up the machine so it doesn’t like a mess.  The upside to selling off equipment is freeing up workspace in the facility, which can be reused for productive purposes, or the business can be relocated to a smaller space with a reduced occupancy cost.
#8.  Following up on spring cleaning the business, make sure to clear out dead inventory.  Dead inventory is inventory that has gathered dust, is out of date, obsolete, and no longer in demand from customers.  Getting rid of it, via liquidation or other methods puts some cash back into the business, and  clears space for good inventory, or just the option to operate in smaller space.
#9.  Clean up and organize the office and production floor.  While a slightly messy space can imply a busy business, it more often connotes a business that is disorganized.  People make judgments based on appearance, and a untidy and disheveled office appearance is a real turn off to a buyer.
#10.  Have a proper Social Media Marketing Strategy.  Depending on your business, this could involve a thorough website, twitter accounts, Manta.com Company Page, Employees on Quora.com, Facebook Fan Pages, LinkedIn Profiles for key employees and a LinkedIn Company Page.  Social Media is complicated, but make sure to utilize it for business purposes on business accounts.

For More Information on how Just Elementary, Inc. can help you with implementing the above tips, Please call our Client Care Manager Sonia Chhabra at (888) 926-9193 or email cs@justelementary.com