What do you need to do 3 months prior to listing your business for sale

We mentioned in the previous post that selling a business is a long, arduous process. It is not uncommon to take more than a year to sell the business. In the post we showed items you need to take care of 1 year prior to putting your business for sale.
As the date of putting the business for sale approaches there are additional items you need to start working on. Just like selling your house, you need to get your business ready 3 months prior to listing date. The goal is to spruce up the image, both physical and virtual, of the business so that the buyer will find it attractive and worth paying for. You should also aim to remove the fear and uncertainty in buyers because this is the single most reason why many buyers are reluctant to sign on the dotted line at closing.
So, what actions do you need to take 3 months in advance? Here is a list of items we think are important based on our prior experience.

1. Prepare financial documents
   The first thing potential buyer will ask for when looking at your business is 3 years worth of financial records. These include profit & loss statement, balance sheet and cash flow statement. In addition, they will require official tax documents for those 3 years. We have also found it useful to prepare a one page summary of overall business performance with graphs and charts that quickly provides financial overview of your business. You can look at this sample due diligence document to get an overview of the graphs you should prepare. It is your responsibility to have the backup data ready in case the buyer wants to know more details on certain items. Our suggestion is to prepare a list of questions that the buyer is likely to ask based on your financial documents and prepare the answers.
2. Fix premises
   Look around your premises and make sure everything looks tidy and is in working condition. After all, just like selling house the first impression matters when showing your business to the buyer. Items to look for are everything that the buyer will encounter during walking tour, including building signs, equipments, heating and cooling system, refrigerator and so on.
3. Collect outstanding receivables
   If your customers are taking long time to pay your bills, now is the time to ask them to expedite. The buyers get nervous when they find large amount of outstanding receivables on your financial statements. See if you can provide discounts to the laggards to make them pay sooner.
4. Retain key employees
   If you have certain employees (e.g. store manager) who are instrumental to running your day-to-day business do everything you can to hold on to them. You cannot afford to lose key employees and scramble to find replacement during sell process. Our advice is to give them one-time special bonus and incentives to stay around.
5. Hire a broker
   If you are planning to hire a broker to sell your business put an extra effort to learn their background and hire the best one. Effort you put in hiring a good business broker will make a huge difference during selling process. Talk to your colleagues and business partners for referral. It is better than rolling a dice on someone based on the written description.
6. Determine sale price
   Obviously, you want to get maximum price for your business. On the other hand, it has to be reasonable and in line with what market can afford. You should look at comparable businesses that were sold recently and the price the buyers paid. Websites such as BizBuySell.com and BizQuest.com provide good information on the comparables based on industry, size, location and so on. Also, talk to your broker for his/her advice based on their knowledge of the market.

This is a long of items you need to take care of before the business is listed. One advice we can give from our own experience is to start early and be prompt. The longer you put off taking care of the preparation, the longer it will take to sell your business.
We would love to hear your stories and experience in the comments below.