You should never simply decide to sell your business. Let’s see the complete pre-sale checklist for your online business.
Allow me to explain what I mean. You decide what to wear when you wake up in the morning. You decide what to have for lunch every day. You decide what to watch on Netflix in the evening.
When it comes to selling your business, it’s something you should plan. You need to understand what makes your business valuable and why. You need a solid grasp of your assets, liabilities, strengths, and weaknesses.
Perhaps most importantly, you need to do everything in your power to ensure a smooth transition for your buyer.
Below, you’ll find a checklist detailing each step you need to take before finalizing a sale. It’s important to note, however, that this checklist isn’t just valuable if you’re thinking of selling. Many of these steps are things you should be doing as part of your regular business operations.
That way, if you suddenly start feeling burnt out or desperate for an exit, you’ll already have a solid idea of what needs to be done.
Table of Contents
1. Determine Your Reasons for Selling
At some point, a prospective buyer will ask you why you’re selling your business. You need to be certain you can openly and honestly articulate that to them. As such, if you’re planning an exit, the first step is to take a moment to think about your reason for doing so.
Ask yourself the following questions:
- Do I want to remain involved in my business to some extent after selling?
- What am I trying to achieve financially with this sale?
- What do I plan to do once the business is sold?
- What is the current health of my business? What about the overall market?
As you may have surmised, it’s not just for the sake of your buyers that you should understand your reasons for selling. It’s for your sake, too. If you don’t know your core goals, you cannot effectively plan your exit.
2. Get Regular Valuations
Even if you aren’t currently planning to sell your business, it’s important to seek regular, professional valuations. Generally, I’d recommend you have these assessments carried out at least annually, but ideally, you should do them quarterly. Not only can this give you some notion of where your greatest value lies, but it can also help you determine if your efforts are helping or hurting.
3. Give Yourself Time To Prepare
A sale does not happen overnight. You’re going to need a window to get your affairs in order. My recommendation is to spend at least a year in preparation before you even think of finalizing a sale.
4. Gather a Team
Selling a business, even if it’s something as simple as a microblogging site, can be an incredibly complex process. It’s not something you should ever attempt to do on your own. You’ll need a multidisciplinary team comprised of the following professionals:
- An accountant.
- A bookkeeper.
- An attorney, ideally one with comprehensive knowledge of tax law and experience in acquisitions.
- A valuation expert.
- A business broker (optional).
5. Understand What Makes a Business Valuable
Generally speaking, there are four core characteristics that a savvy buyer will examine to determine if a business is worth acquiring. At Quiet Light Brokerage, we call these the four pillars of business value. They are as follows:
- Growth. Is your business trending upwards year-over-year? Are there any untapped or emerging opportunities for further growth?
- Transferability. Can your business function effectively without your direct involvement? How easily can the business and its assets be transferred to a new owner?
- Risk. Is your business reliant on a single source of revenue? Are there multiple points of failure which could cripple revenue and growth?
- Documentation. We’ll discuss this in greater depth later in the list, but it’s imperative that you gather and organizer all the necessary records and documents well in advance of making a sale.
6. Categorize Your Assets
If your business maintains an inventory, make sure you have an effective tracking and management solution in place. Beyond that, you’ll want to make note of your business’s assets and the general value of each. These include tangible assets such as servers and furniture as well as intangible assets such as copyrights and reputation.
7. Do a SWOT Analysis
One of the reasons I recommend preparing to sell well in advance is because it gives you time to bring your business up to its full potential. To that end, you should carry out an in-depth analysis of your business’s Strengths, Weaknesses, Opportunities, and Threats (SWOT). This should be done either quarterly or bi-annually.
8. Optimize and Streamline Operations
You’ll also want to regularly look for inefficiencies, redundancies, and single points of failure. Essentially, you want to keep an eye out for anything you think may cause problems for a buyer or impede revenue/growth. This is an ongoing process, and ties into your SWOT analysis.
9. Gather Critical Documentation
You will need the following documents available to buyers (and for your own sake):
- General information on your business (website, contact details, etc.)
- At least three years of organized financials. This should include income statements, audit records, balance sheets, seller’s discretionary earnings, tax returns, and financial trends.
- A full list of your business’s assets, including product inventory and intellectual property.
- Any relevant vendor contracts or agreements.
- If relevant, any liens or debts your business currently holds. If your business is involved in ongoing litigation, this must be included as well.
- Legal paperwork, including articles of incorporation, insurance details, stockholder agreements, bylaws, employee contracts, client details, etc.
- Your marketing/advertising strategy.
- Your business’s overall roadmap for current and future growth.
- Paperwork/contracts related to web hosting, mobile carriers, utilities, etc.
- Information on employees; will they be staying on after the sale?
10. Make Note of Your Duties
As mentioned earlier, your main goal is to make your business as easy to transfer as you can. To that end, figure out your current involvement in business operations. Try to reduce that involvement as much as possible.
11. Review Your Website
You’ll want to conduct a full audit of your website, including:
- What do your traffic numbers look like?
- Is your website intuitive and easy to use?
- How well does your site perform under heavy load?
- Are there any bottlenecks that may potentially cause problems?
- How well does content on your site generally perform?
12. Check-In With Your Vendors
When you start drawing up plans for an exit, one of the most important things to do is reach out to your vendors and business partners. Inform them of the eventual change in ownership. Work with them to determine if their contract will transfer to the new owner or end when you exit.
13. Make Sure Your Cybersecurity Is up To Par
First, collect all authentication data into a password manager such as LastPass. Make sure all accounts are protected by strong passwords, and that no one has any permissions they shouldn’t. Carry out a full malware scan of your entire infrastructure.
14. Determine How, Where, and To Whom You’re Selling
Who is your ideal buyer, and where are you likely to find them? Will you use a business broker to facilitate the sale, or try to manage it on your own. Are you looking for investors, or simply new ownership?
15. Figure Out if You Want To Offer Seller Financing
Although seller financing potentially opens your sale to a far larger audience of prospective buyers, it carries with it a degree of risk for you as a seller. Nonpayment, for instance, can be an absolute nightmare to deal with. On the other hand, a financing agreement can ensure you pay lower taxes on the sale in the long run.
16. Conduct Due Diligence on Buyers
Buyers aren’t the only ones who should be doing their homework in a business transaction. You need to ensure that each prospective buyer not only has the necessary funds to proceed with the acquisition but also the necessary expertise to not run the business into the ground. This process is known as qualifying your buyers.
17. Deal With Outstanding Issues
Problems you may want to address before selling include:
- Outstanding debts.
- Unfinished projects.
- Ongoing legal battles.
- Upcoming market changes.
- Negative reviews.
- Controversies/reputational damage.
- Security incidents.
18. Think About What To Do Afterwards
Last but certainly not least, before you sell, you’ll want to consider what comes next. What will you do after your exit? How will you use the money generated from the sale?
What do you want?
Never Go in Without a Plan
Selling your business isn’t something you should do on a whim, nor is it something you should do in a short timeframe. A sale needs to be a strategic, carefully-considered choice. And if at any point in the process, you begin to have doubts, that’s fine.
You can (and should) take as long as you need to ensure you’re 100 percent ready.
About the Author
“Christopher Moore is the Chief Marketing Officer at Quiet Light, which specializes in helping clients sell their internet-based businesses. Additionally, he founded Gadabout Media LLC to inspire, educate, and unite others by creating visually stunning content for clients.”