Selling Your Business in 2020? 6 Steps You Should Take Now

Mark Dorn

As a business owner, executing the successful sale or transition of your business can often feel like you’re the quarterback in the midst of a nail-biting football game. Imagine you’re in the red zone, it’s fourth down with thirty seconds left in the game. You’ve dreamt of this moment, and rehearsed this exact scenario at practice. One play stands between you and an undefeated season. What are you going to call?

With succession planning, the stakes are equally as high - there’s just more time on the clock. As a business owner, and the quarterback of your future, take an offensive versus defensive position on implementing a business sales process. Many owners underestimate the current stringent process standards of acquiring buyers. Informed decisions and better planning can often enhance the sales price of the business by 20%-plus, and helps avoid a failed sales process that can negatively impact the business.

To ensure you’re well-equipped to engage with prospective buyers come January, we recommend you have the following items in line to ensure a successful transition or sale:


  1. The best way to start creating a successful offense is to build a strong, well-rounded team. Interview and establish your advisor and team of experts: begin detailed discussions with legal, financial, business brokers, tax and IT professionals. Consider including business assessment tools and consulting to further profile the “SWOT” (Strengths, weaknesses, opportunities and threats) summary so you can adjust as needed.

  2.  Evaluate likely exit strategies to forecast what could happen if you do or don’t sell your business. This could be evaluating the chances for a strategic buyer, competitor buyer, private equity buyer, or employee buy-out. Get feedback from investment bankers and brokers on what the market has been for similar companies that sold in the last year. Competitive analysis can help forecast what might happen if your competitors sold to other larger players and you don’t sell. Decide if you can sell. Work with your financial advisor to determine if the sales price and exit from the business will achieve the owner’s post-sale personal financial goals or not.

  3.  Review various business valuations and secure a qualified third-party opinion on valuation. Decide the most advantageous sales pricing methodologies, be it revenue based, EBIT (earnings) based, recurring revenue based, or asset value. Consider base term sheet content areas sellers would find valuable.

  4.  Clean up business financial reporting data and statements. Have three years of financials and keep the year-to-date data current. Accuracy is key here, so I recommend triple checking the data, as it will no doubt be closely reviewed by potential buyers. Decide now on how to handle unresolved bad debt issues, reserve levels, and cash left in/taken out of the business to reduce or eliminate personal expenses. Update your inventory. Consider any revenue recognition or capitalization topics, modeling your revenue forecast for three future years. Update your business plan as it relates to financial projections for 2020. They need to be realistic and attainable. Otherwise, bidders may adjust offers if the results lag.

  5.  Manage risks by migrating contract terms to longer commitments. Focus on new sales to avoid key dependency of a limited number of customers, and supplier/vendor contracts and costs. At this time, key decisions need to be made to exit or to extend existing leases. Promote and secure key staff as needed and tie compensation into longer term incentives to stay. Handle any IT Risks that have not been addressed. Secure Service Organization Control (SOC) compliance if practical or needed.

  6.  Prepare for due diligence. A data room to store key documents needed during due diligence is helpful. The following documents should be on file: all client, employment and vendor contracts and leases, tax filing reports, loan documents, bank statements, intellectual property and IP related documents, including asset lists and any trademark filings.


After these introductory items are in line, it's time to begin planning for a 9-12 month sale process. It might seem daunting, but remember that preparation is key. Quarterbacks spend years practicing and preparing to score that championship winning touchdown. Business owners must also spend time preparing for a winning sale, but not without the help of a trusted team.  

Business Succession Advisors is there for you every step of the way to ensure a successful sale process. Check out founder Nick Giacoumakis’ guidance on how to engage prospective buyers in his latest for Kiplinger’s.