Selling a business may be the biggest and most important transaction in a business owners’ life.

We talked with Lauren Altschuler, a Certified Exit Planning Advisor with Transworld Business Advisors of Minnesota about the process of preparing for a sale.

“Many sellers want to know the best time to sell their business. The simplest answer is typically when they least want to. Owners should sell their business when the business is running like a well-oiled machine, humming along without much effort. That is when the business will be most attractive to buyers. “

She advises against procrastinating succession planning because it takes more time and effort than one might expect. She said, “it’s at least a year-long planning process and the sale of a business can take six months to two years.” Lauren adds, “be prepared for it to be the most planful process of your life!”

Lauren recommended the following tips to get started:

Be prepared

We can’t always predict the future. Preparing an exit strategy in advance will help in the event of an unexpected circumstance such as death, divorce or disability that can force an exit, or a catastrophic occurrence, such as a market change, lawsuit or competitor encroaching.  An exit strategy can be a contingency plan ready for execution if/when required.

Think through who might be the best buyer. An heir, a business partner, an employee or outside party? It is also important for an owner to think through whether they care to retain a position or board seat after the sale.

Forecasting market conditions, industry trends and interest rates are also important factors when determining the timing of a sale.

Clean up Financial Statements

Start by discontinuing unprofitable products or services, decreasing administrative costs and removing personal expenses such as salaries of non-working family members, cars and miscellaneous household expenses from the income statement.

Buyers want to see at least three years of upward trending cash flow, customer diversity, recurring revenue and established processes and systems. The less the business is reliant on the current business owner, the easier it will be for a buyer to step in and find success.

If the business does not already have competent financial leadership, it would be prudent to hire help. A good CFO can help with financial clean up, as well as ongoing reliable reporting as required by a due diligence team.

A financial audit conducted by a reputable CPA firm is also recommended to provide assurance to prospective buyers that they can trust the thoroughness and accuracy of the financial reporting.

Bring in experts

Hire a business broker or M&A consultant who understands the expectations of banks and buyers to assess the value of the business. This will include any property or capital equipment that is used in the business.

It’s important to set an accurate, reasonable listing price. Business owners are sometimes sentimental about leaving a legacy which can result in unrealistic expectations. A business broker will provide objective third-party advice on establishing an optimal sales price.

Business brokers also have a solid understanding of what buyers are looking for and most have a database of pre-qualified buyers seeking strong business investments.

Bottom line, there is a lot to consider when planning to sell a business. It is never too soon to start planning, and don’t try to do it alone.