You never know when someone will approach you to acquire your business, it’s generally unexpected. However, although you may not have been expecting the approach, you should always be prepared. In short, your company should always be running in tip-top condition. When you are focusing on selling goods/services and growth, it may seem hard or a waste of time, to address things that need to be done to ensure that your company is as efficient and scalable as it can be. Running a business is not easy, keeping it constantly ready for sale is another stress, but worth it in the long run. Here we discuss five things you can do to remain ever-prepared for a business sale.
Maintain and update legal documentation
Having appropriate legal documentation on hand is standard business practice. However, preparing these documents with a potential sale in mind is a step often missed. Always make sure you have the documentation of your corporate formation, operating agreements, partner agreements, investor agreements, loans, vendor agreements, employee agreements, and incentive agreements in place. Here are some tips to streamline the process.
In modern business, everyone should go paperless. It’s not just the environmental benefits, going paperless makes you more streamlined, efficient, and saleable. In short, scan everything and move your files to ‘the cloud,’ preferably in some type of data room. This may seem like a pain, but it will allow you to share documents more easily; with your lawyers, clients and a potential acquirer. No one wants to examine binders and binders of paper contracts…and yes you will save some trees in the process.
But going digital doesn’t mean you just dump everything on a hard drive, or into this mythical cloud. Best practices in the physical form remain in the digital sphere. Your files still need to be uncluttered and organized. This can actually be harder digitally, as you can’t see the build-up of paper. Here are some tips:
Keep Your Books Current
Not monitoring financials and forecasting is like trying to drive a car without a steering wheel. Not only is it illegal, it’s fairly stupid. More so, your team needs to know where the company is heading, why you are making the decisions you are making. Financials help justify your actions.
I recommend keeping monthly or at least quarterly financials up to date. Annual reporting is sloppy and designed for large corporations with hundreds of departments. Not seeing where your money is coming from and where it is going kills any chances of proper financial planning for the future. More so, if you are approached for a sale, you have to have up to date numbers on hand. Here are some tips:
Define Roles & Responsibilities
Well-documented roles and responsibilities keep your team happy, and helps prepare your company for a sale. Accountability is king. If something goes wrong or something falls through the cracks, everyone needs to know whose shoulders it fell on. Knowing who does what will help in discussions with an acquirer, they will be thinking who they could let go / who they need to hire. Here are some useful tips:
Procedure & Process Documentation
A properly documented company is saleable, efficient, and able to learn from its mistakes. When everything is running smooth, these documents will not get a look. But if you sell, and you hand over your operations, the company will want these. Keep them up to date and relevant. Here are some tips: