Financial Statements
Prepare financial statements that illustrate true profitability and asset values. Many privately owned companies have higher than normal executive salaries, one time expense items and other adjustments that may not accurately reflect the true performance of your company. Asset values may be understated since traditional accounting practices reflect asset values based on cost.
The basic rule is to operate your company in the ordinary course of business. Optional capital expenditures should be deferred to minimize debt, maximize cash and to allow the buyer to make the decision.
Prepare your facilities for visitors. A fresh coat of paint and a general clean-up will enhance a visitor's first impression. Neat, orderly facilities imply a well run operation. The reverse is also true.
Know your asking price. A price range is usually the best approach. Asking the highest expected price usually discourages buyers. Busy executives do not like to waste time visiting what they view as over priced companies. Value increases in the minds of buyers with the investment of time.
Establish the general terms of sale you will consider. Some important issues are: 1) stock or asset sale, 2) cash, 3) notes, 4) noncompete and consulting agreement. The lowest price you will receive is usually all cash and the highest will be a combination of cash and some form of time payments.
Prepare a realistic five year forecast. The forecast should reflect operations under new ownership and considering the company will be operated like a public company.
Clear, concise documentation that can be read in 15 minutes or less should be prepared. This documentation should answer the 20 to 40 key questions about the company. Business plans are usually inadequate.
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