Year-End Checklist for Selling a Business in 2022
If you are thinking of selling your business in 2022 (or even 2025), taking the time now to get prepared and organized, will save time and effort in the future.
Here is a list of 12 things every business owner should review each year:
1) Financials: Every year, try to improve the quality and timeliness of your company’s financial reporting. The year-end is a good time to talk with your CPA about how to clean up your profit and loss statement and balance sheet and eliminate any line items that are no longer relevant. Work with your CPA to document and categorize any one-time expenses or personal expenses, so your CPA and your M&A advisor can help you calculate an accurate adjusted EBITDA for your business.
2) Due Diligence Checklist: Build a relationship with an M&A advisor and ask for an example of a basic due diligence checklist. Have someone in your company assemble as many of the items as possible and store scanned copies in a digital file storage area like Google Drive or Dropbox. This will save you an enormous amount of time and stress, especially if a great buyer suddenly shows up at your door. Work on it a little bit at a time (or delegate it) so it is not overwhelming.
3) Delegate: Think about your business and life goals. Are there things you want to achieve but have not been able to do because you are too busy doing other things? One way to improve the value of your business is to enable it to run without you. As a business owner, your role is to be a strategic planner and visionary. That means you need to delegate as much of your operating responsibilities as possible. Think about what you can delegate in the coming year.
4) M&A Advisor: Check in with an M&A advisor who you trust to discuss market trends, multiples, the pros and cons of your business, and get a valuation done. You should ask your M&A advisor to update your valuation every year so that you can make informed decisions about your options.
5) Sales and Marketing: Step back and consider your company’s overall sales and marketing strategy. If something is not working, try something new. Eliminate programs that aren’t working. Document everything so you can describe the strategy to a potential buyer.
6) Reduce Expenses: Have someone review expenses. Everything from paper costs to insurance premiums. Get new estimates on all major expenses. Every dollar you save goes to the bottom line, which is multiplied by the deal at the time of the sale. So if you can reduce your expenses by $20,000 next year, the value of your business increases between $60,000 and $140,000 depending on the industry you’re in and the size of your business.
7) Website, Social Media: If your website looks like it was made in 1998, it is time to invest in a new one. While we all know not to judge a book by its cover, most new customers and potential buyers judge you based on how your business presents itself online. So make sure your website looks professional, has accurate information, and works. If you have news, blogs, or social media posts, make sure they are up to date.
8) Tax Planning: Check in with your CPA and attorney to explore what you can be doing now to reduce or eliminate any capital gains taxes that will be due when you sell your business. Effective tax planning takes time but can save you a lot of money in the end.
9) Inventory: Make sure your inventory is current. Write off and get rid of any obsolete inventory.
10) Maintenance & Cleaning: Look at your business through a buyer’s eyes. Does anything need to be painted, cleaned, or thrown out? If a buyer called and wanted to meet with you tomorrow, would your business show well? Also, your employees will appreciate working in a clean, well-lit, and positive environment.
11) Financial Planning: Talk with your financial advisor to determine how much you need to net from the sale of your business in order to meet your financial goals. This does not affect the value of your business, but it does
12) Check in with your kids: The holidays are a good time to have an honest and open conversation with your kids about their goals and to see if they would be interested in taking over your business. Don’t wait until you’re ready to sell, to find out your kids always thought they would take over the family business.
It is not possible to address every item on this list at once. But, if you address one or two items a month, it will help improve the value of your company and make selling your business in 2022 much smoother.
Rich Jackim, is the founder of Jackim Woods & Co and the Exit Planning Institute. He’s also the author of The $10 Trillion Opportunity – Designing Success Exit Strategies for Middle Market Businesses.
If you are thinking of selling your business in 2022, contact Rich for a free, confidential, no-obligation consultation to learn about your options.
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