If you’re a business broker advising clients, how should you guide them as they cycle into the selling mode? Prepare the business for sale. Business owners must be proactive in preparing their business for sale. If you’re a broker, get in there and advise your client on the key items that motivate a buyer to chose your client’s business over other businesses on the market. The business owner needs to be reminded that there are dozens or hundreds of similar businesses coming to market and they need theirs to stand out. Get some of the basics done early on. If any equipment needs updating, get it done. Can the owner increase revenue in the near-term by increasing their marketing efforts? If so, make the suggestion.

Prepare clean financials. As I write this, unemployment in the United States and several other Western countries is at a 50 year low which means that most people that want to work are working. That means labor costs are rising as employers compete for scarce workers. There’s little that can be done to reduce costs in this category but every other expense line item should be scrutinized to squeeze out as much savings as possible. You want the Discretionary Earnings as a percentage of revenue to rise. Analyze “owner benefits” to see if there might be a bit too much dough going out the door – in cash or otherwise – in the pockets of the owners. You’ll need clean, clear financials for at least the last three – and preferably five – years. Get rid of excess or obsolete inventory. Excess or obsolete inventory can cause problems when establishing its value and enough such inventory will cause a buyer to look at many other aspects of the business with a level of skepticism. If the books show $450,000 in inventory but a third of it is obsolete and essentially worth 10¢ on the dollar, call in a liquidator and get rid of it. Removing excess or obsolete inventory will illustrate to buyers that the business has not been neglected. Clean the joint up. I’ve harped on this repeatedly, in blog posts – like this one – and podcasts. Pay attention to this! Keep their eye on the ball. Many times, deciding to sell generates in the seller a bad case of “senior-itis”, the disease that afflicts many high school and university seniors in that they think the work is done. It ain’t, Bucko. That last item is one of the most significant reasons that business owners should hire a professional business broker. If an owner takes his or her hands off the wheel – due to “senior-itis” or because they want to try to sell their business themselves, the business is likely to suffer from this lack of attention. This almost always translates to a lower valuation. In fact, once deciding to sell, it’s more important than ever for owners to invest their time in the business – and to get a professional business broker to handle the valuation, marketing, vetting of potential buyers, negotiating and shepherding the deal through to closing.