Get Your House In Order
By Peter Stahl

If you are thinking about selling your company next year, it is time to get your house in order. Prepare today, so you can sell tomorrow! A smart buyer will look into every corner of your business, if he or she is serious about buying it -- and you want a smart, serious buyer. You need to put yourself in the shoes of the buyer. Taking things from their viewpoint, you must examine their motives and objectives as they look at your company. In order to satisfy the buyer's needs, you will need to assemble a lot of information that can be put into a package for future prospects.

The preparation process is probably the single most important aspect of selling your business and getting the price you want. Some people go as far as saying that on the very first day you set up your business, you should plan for the day you will sell it. By formulating an exit plan early in your business development, you can intelligently structure your business for maximum resale value. Designing an exit plan may be time consuming, but it pays off in increased value for your business --whether today or in the future. Several months may be needed to position the business correctly, but that is time well spent.

There are four main categories of information you'll need to pull together to sell your business: legal, financial, marketing and operational. Regardless of whether you are a publisher, printer, distributor or a production company, the questions that need to be addressed in an acquisition profile are essentially the same. The following are some guidelines as to what is expected in most situations.

Legal Information
The legal information you will need to provide are documents and contracts crucial to conducting your business. Any leases, (including real estate and equipment leases as well as any agreements with suppliers defining special circumstances such as protected territories with exclusive rights) licenses, employment agreements, loans and notes should all be included. List your trademarks and copyrights and make sure you have them in order.

It is also time to take care of any unresolved legal problems, labor disputes or contingent liabilities that might have accumulated over the years. Resolving these problems should begin immediately and they should be taken care of before you ever place the company on the market.

Financial Information
Getting your financial house together is a crucial step in getting the price you want. After all, when you sell your business, what you are really selling is the bottom line. Therefore, remember to show your true cash flow by keeping records of owner's salary and compensation, personal travel, life insurance, personal car expense as well as other perks.

The financial information should include three (preferably five) years of complete financial statements such as: Income Statement, Balance Sheet and Cash-Flow Statement; as well as pro forma sales and profit projections. Buyers may also want to see the more long-term sales history of your company, as well as monthly sales figures. If you have multiple income streams, you want to break down your income by source.

A current inventory list, as well as, a list of all tangible assets to be transferred in the sale, with their book value, is necessary. It is also time to tighten accounts receivable and get your aging payables statements in order.

Sales and Marketing Information
The marketing information should have examples of your promotional literature and advertising. It should describe the channels of distribution, prices, credit terms and discount structure as well as the allowances and incentives. Most important, it should set forth your marketing strategy and future opportunities.

Whether your revenue is derived from direct sales or dealers, a potential buyer wants to see a breakdown of how much comes from where. Examine the depth, breadth and profitability of your product line(s). To see who your breadwinners and dust collectors are, buyers want to see both unit and dollar sales by product lines or title.

Identify the customers to whom your product is offered. A list of your principal customers, and their purchase volumes will divulge how broadly your market is based. If you rely on distributors, you need to show who they are, and how much sales each of them represent.

Operational Information
The operations section should include a discussion of policies and procedures. Give a brief description of each key employee (with their responsibilities, length of service and salary history as well as special skills and contributions). Buyers usually want to see how your company is organized, so it is a good idea to include an organizational chart. Even though employees never appear on the balance sheet, they may be a company's largest asset -- therefore, weed out unproductive crewmembers to make sure you sell your company with a lean, strong staff.

Now that you've assembled all the information in four neat piles, you're ready to package it for consumption. This is a true packaging job, and an experienced acquisition consultant can be invaluable at this time to make sure that all pertinent information is included and presented correctly. Most buyers have looked at numerous businesses before yours. Consequently, a presentation document that makes a good first impression, can go a long way towards setting your opportunity apart from the crowd.

Conclusion
To the first time seller, this may seem like a lot of information that needs to be gathered. After all, you have a good business, so preparing it for sale might sound like a waste of time. Quite often we run into highly profitable businesses that seem to run on auto-pilot. The company is profitable and there has never been a reason to take a closer look at its operations or to find out where the money is coming from or where it is going. However, to maximize the sale price, even profitable companies need to provide factual, reasonable and justified information to the buyer -- if not, most buyers will make deductions from the purchase price to cushion themselves against every uncertainty.