For Sale By Owner
The good news is that planning for a sale at some indefinite future date will pay off not only then, but in the interim as well. These planning steps will improve profitability and make it easier to run the business through better systems and better organization. Even if the business is passed on to children or relatives, the benefits of the planning-for-sale process will improve the business.
This month I would like to proceed through all the steps I have seen pay off, going through the business task by task.
First Hurdle: The first step in getting the business ready for potential buyers is the most challenging. And that is overcoming the mental attitude that interferes with the clean-up for sale.
I will acknowledge the fact that, for some owners, even thinking about selling produces uncertainty, maybe fear, since they would be departing from a significant part of their lives. Admittedly, if an owner is convinced they will “never” sell, it is an uphill battle to convince that person to prepare for something that supposedly will not occur. (There are lots of nonsellers who have ultimately sold.) Look at the changes as a “spring cleaning” if you have to.
All of us resist change, but change a few things you must in order to get the business ready for sale (even if you do not plan to sell). So relax, open up your mind to new ideas and allow the preparation to take place. It's not very costly, so drop that objection; it's even rewarding, once you get started. However, the attitude adjustment is a mandatory first step.
Clean & Shiny: All of us have sold a car. And one of the first steps in getting a car ready to sell is to make sure it is clean, polished and shiny. After all, how many would buy a car that was not as clean as it could be? The better it looks, the more you receive at sale.
The same concept, interestingly enough, applies to selling a business. It if doesn't look clean and orderly, the price drops. Why give away what you are due for the business? You have earned every dollar you receive; don't leave them in the hands of the buyer.
Let me be more specific about the clean-up process.
Go even further; remove the old inventory from the trucks, and from the warehouse, too. If you are not going to use it, or it is out of date, remove it - regardless of what you paid for it.
The office environment needs to be bright and up-to-date. For example, replace old, broken-back chairs or gouged, chipped desks. No need to break the budget with the newest, top-of-the-line office furniture if the business can't afford it, but clean, modern, serviceable furniture is a minimum.
Throw out that old, broken fax machine from 10 years ago. Toss along with it inoperative calculators or other dated and probably broken office equipment. Again, streamline. Only keep operational equipment, and don't forget to wipe it off, so it looks clean and shiny like the rest of the business.
Soon your employees will notice the difference; the changes will brighten their outlook and attitude toward working in the office. They will have more respect for the place where they work, and their productivity will demonstrate their favorable response.
Trucks: Trucks are business equipment, the workhorses of the business, but that doesn't mean they have to appear well-used and beat. In fact, you want the contrary. You want them to look like the day they left the factory, to show they receive good maintenance and are not abused by their drivers.
Buyers know that customers see the trucks, too, so they are not going to be interested in a business that portrays an image that offends customers or looks like neither the management nor the technicians care about the appearance of the company's vehicles.
Let me give you some specific suggestions for trucks.
First, paint them if they are not clean and shiny. Outside appearances matter, not just what they haul. Put the company's name on the truck, so the truck represents the company. Would you post an advertisement showing a dirty, dented, truck that needed paint? Unlikely. Remember, you have billboards all over town with your company's name on them - your trucks.
Clean out the inside of the truck, too. No old inventory, no old equipment or tools. Maybe hold a technician tool day where worn out or missing tools are replaced. Any tools that needed repair could be fixed then. The truck itself is a tool; it should not appear broken down, needing repair or replacement, from the inside or outside.
Warehouse: A warehouse is a place to store inventory, not all the junk (sorry, memorabilia from the business' history) that is hanging around in out-of-the-way spots and dark corners. Get rid of all that stuff that has been sitting there for years and isn't worth anything, and is an eyesore.
Listen, the supply house isn't going to take it back. Toss it. I know it's painful to throw those “valuable” items out, but, believe me, the value you receive for the improved appearance of the warehouse after ridding yourself of that trash will more than cover your sorrow.
Efficient warehouses have two ingredients that demonstrate their modern efficiency: labels on bins and quality racks. Label every storage spot and get new racks. They are not expensive (check out Costco.com). Your warehouse will not only be efficient, it will look like the picture of a modern, organized warehouse. That means efficiency and bottom-line profits to a buyer. Their concerns about inventory control and storage practices will be reduced.
Finally, clean the warehouse after all the unneeded items are disposed of. It will look as efficient as it is with the new racks and labels.
Accounting: Dump old, unnecessary paperwork. Try to be as paperless as possible, keeping records on backed-up computers. For the computers, update the software, get the latest versions and update all the accounting records.
You should be able to quickly access any financial reports, billing, payroll and other crucial data. With good accounting records, for example, you will be able to print current depreciation schedules for equipment and trucks and interim financial statements. Buyers will be looking for records like those.
Meet with your accountant and set up a budget and complete financial statements. Again, buyers will be looking for them. The better the records, the more valuable the business - and an easier sell.
Personnel: Eliminate unnecessary positions to cut expenses and streamline your operations. Complete and document employee performance reviews (I know it's extra effort, but it's good management and, if done right, a motivator for employees, too).
Review employee interview procedures and have them available and orderly. Review your workers' compensation programs and your liability insurance as well. See where you can save money and reduce liability. Incentive pay programs may show the business is worth more, but even if you never sell, you will improve morale, increase productivity and improve employee retention by implementing these programs.
I always recommend to owners that if you operate a quality service business, the technicians - the employees who interact with the public - should look like professionals. That means no dirty T-shirts or jeans. Instead, your customers should see sharp-looking technicians dressed in clean uniforms, giving them confidence the technician works for a reputable shop and is a professional himself.
Management & Legal: I rarely see a business sold with a pending legal dispute. Do what it takes to get rid of any legal cases still dragging on. Buyers avoid them immediately and walk away.
One way to avoid legal actions and disputes is to have a “bulletproof” employee manual, one that doesn't invite employee claims and disposes of the majority of common disputes before they start. Contact a professional on this item. Don't amateurishly assemble one yourself.
Managing and training employees well will pay off whether or not you sell. Buyers like businesses that show they train their employees to do their jobs the right way. Pay special attention to the production arm of your business. This will produce more business and show potential buyers you run a quality business.
You can't start preparations the day before the buyers show up on your doorstep. Start your preparation for sale now, so when you're ready, you will be ready to sell. And if you don't sell, you'll enjoy the benefits of the increased productivity.