Coming to a point where you’re ready and able to sell can be a business can be an exciting prospect. But much like selling a home, it’s not finished until the transaction is complete. Getting ready to sell your business requires you to take several things into consideration and identify what will motivate buyers. While these considerations can be expansive, let’s take a look at three financial aspects to analyze when selling your business.
1. Income and Cash Flow Sheets
Those interested in purchasing a business need to make sure that the business in question is actually profitable. This is why it’s important to make sure that you have all of your income sheets in order to see where the money is coming from and how much money your business has come in on a monthly basis.
Of course, you’ll also need to provide prospective buyers with information as to how financially healthy your company is based on where money is moving. Cash flow sheets are another major financial aspect to analyze and produce when you’re planning onselling your business. The more information buyers have, the more confidently they can make a purchase.
2. Balance Sheets and Related Records
Balance sheets can be insightful reports that show buyers what assets a company has, what liabilities it has, and what the difference between the two is, which represents owners’ equity. Liquidity, debts, owed and more mean a lot to potential buyers.
You should also take the time to draft related reports surrounding some of these financial statements so that buyers can get a better idea of your financial activity at a glance. For example, do you lease office buildings? If so, gather lease agreements. Do you have any upcoming contracts you have to deliver on? Collect those as well. Everything has to be in order before a sale can be made.
3. Identify and Explain Anomalies
Anomalies, as a business owner, might not be a cause for concern. But if someone is outside looking in, a sharp rise and drop in sales could indicate that something is wrong. In this case, you might have experienced an anomaly where you received a very lucrative client that was only a short-term contract. Being able to explain that will give your buyers more confidence that they’re not working with a company where the client churn is high or there are egregious errors being made that drive away clients. Carefully review your financial history to identify any anomalies, then make reports that help explain to buyers what happened during those unique periods of activity.
Given that your financials are one of the most important areas to focus on while you’re operating a business, they’re naturally going to be of great importance to buyers who want to take over your business as well. While there’s a lot to evaluate and collect while you prepare to sell your business to someone else, the three suggestions above should give you a better idea of what you need to address so buyers are more willing to approach your business.