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Preparing to Sell Your Business

Updated: Apr 25



It’s never easy to make the decision to sell your company, but when you do there are a number of things you can do to be prepared for that next big step. No matter where you are in the process these six steps should help ensure that you’re ready.

Get Your Books in Order

This may sound like a no-brainer but there are all kinds of messes out there. If your books ARE in order, that’s great, you shouldn’t have much to do. If you’re not sure, there are a few important steps you should take. Start with pulling together (or asking your CPA or accounting leader for) your last three to five years of financials. You’re going to want detailed financial statements for each year including your profit and loss statements, income statements, cash flow, balance sheets and tax filings.

Review everything for consistency each year between your statements and your filings. You’ll also want to be sure you have information captured in an equivalent manner from year-to-year. For example, are your income streams and expenses all classified the same way each year? Consistency is crucial for accurate year-over-year comparisons.

Make sure you have annual, quarterly and monthly statements so you can accurately break things out and see trends. Also, there have been some wild swings over the past few years so having 5 years worth of financial statements available is a good idea. You’ll need all of this for the next step.

Understand Your Financials

It’s one thing to know your operating income, expenses and cash flow but understanding your “true” finances is a little different, especially when you’re looking to sell. What this means is that you almost certainly have expenses that will not carry over to the future owner. Likewise, you may have others that will but at different levels. You may also have revenue sources that don’t carry over due to the buyer’s existing relationships or other circumstances. You will need to be able to identify these “add backs” and “chargebacks” to determine an accurate valuation.

When going through your financial information it’s important to identify your various sources of income and realistically determine if it will continue to produce revenue. In the same vein it’s important to go through your expenses and look for items that may no longer be realistic, for example, your automobile lease, certain travel expenses and even various technology and office expenses. Clearly identify and categorize these (if they’re not already) so you can paint the most accurate picture of the potential ongoing operation. Ten thousand dollars here or there can make a difference in your valuation.

It’s also important to identify any assets that you expect to go with the sale and properly value those. One of the most common is real estate, however, in many cases buyers would prefer NOT to take on the real estate as part of a business acquisition. In some cases this can be handled as a separate transaction, in others you may continue to hold the deed and lease back the space at fair market value. In more extreme cases the buyer may want nothing to do with it and it’s completely excluded. So be clear about your assets and liabilities including any investments, cash and even intangibles like trademarks and domain names.

While this isn’t just a financial aspect, you should pull together your lists of vendors and providers that represent both revenue and expenses. What technology systems are you using and how much does that cost? What vendors are providing revenue streams? These are all important aspects of valuing the company since they may be eliminated or carried forward.

Get Your Materials in Order

The materials required can vary wildly depending on the type and size of your business. As a starter would be all of the financials described above (income statements, P&Ls, balance sheets, cash flow statements, and tax returns) that have been certified by your CPA. This is some of the most crucial information for a valuation and to understand the “health” of your business.

But in the process of putting your business on the market there’s a lot more information that will be required to produce the portfolio package. Generally this consists of details about the business, market focus, staff, agents, specialties and more. In most cases the information required should be readily available because you use it frequently to describe your unique value proposition to clients, investors and the market at large. But some of the information may require a bit more digging such as:

  • Original LLC filings or articles of incorporation

  • Operating or partnership agreements and DBAs

  • Trademarks, service marks, domains and intellectual property

  • Investors, silent partners and capitalization table

  • Employee information and salaries

  • Agent information, contractor agreements and splits

  • Office locations and geographic coverage

  • Licenses, MLS and association affiliations

  • Joint ventures, marketing and affiliate agreements

  • E&O, D&O, liability, cyber and other insurance policies

  • Real estate, personal property and physical assets

  • Leases, contracts and license agreements


This is a brief list of the type of information that is typically needed to prepare for sale, facilitate due diligence and smoothly transition ownership from one party to another. Of course there are many more details within each category. One of the most stressful and time-consuming parts of the exercise of selling a company is digging through and summarizing the sheer volume of information but your M&A advisor (see below) will help you through the process and will securely share it only with the right parties.

Assemble the Right Team

This is probably the most overlooked aspect of preparing to sell. It’s important to surround yourself with the right people. As a real estate broker you unquestionably tell prospective sellers “You shouldn’t try to sell on your own, leave it to a professional.” The same holds doubly true when preparing to sell your business.

The first line of assistance you’ll need will be your CPA/accountant and your attorney. You’re going to need to bring them into the mix to help pull together and prepare a variety of materials including your financial statements, tax returns, business filings, and to help review the various contracts and agreements that will flow freely in the process.

Of course, the team members and size of the team can vary depending on the size and structure of your business. If you have family members, partners or investors, they will need to know and be as involved as necessary based on their interest in the business. If you have a board or directors or even advisors, you’ll want them to hear things from you and likely can leverage their expertise.

Next is to bring on an M&A advisor such as Real Estate Mergers & Acquisitions, Co (REMA for short) but what’s important is to have someone on your side that knows the industry, the players, the process and is there to represent YOU…the seller. You need someone in your corner who will help you determine your market value, will present your company in the best possible light, who can help you through the process both transaction-wise and emotionally (there are a LOT of emotions) and who has YOUR interests in clear focus.

Lastly, it’s as important to NOT involve certain people as it is to INVOLVE the right people. The last thing you want is for information to get out, staff to start worrying and agents to start jumping ship. Trust and the understanding of confidentiality are crucial within your team and so are non-disclosure agreements. Make sure everyone involved has read and signed an NDA to protect the confidentiality of all the information that may be discussed.

Keep Running Your Business

Just as you’ve been critical in getting your business to this stage of its life, you’re still crucial to keeping things running smoothly even after you’ve started the M&A process. Maintaining focus, motivating staff and keeping agents productive and happy is perhaps even more crucial at this point. You want things to keep going along as business as usual because it IS business as usual until you see offers and negotiations.

Don’t just do the things you usually do, though, do them with even more purpose. Pay even closer attention to your staff, your producers and those not producing, your vendors, your expenses and revenue streams. Use this as an opportunity to “get to know your business” even better than perhaps you have in years. It will pay off during buyer conversations and negotiations but it will also pay off in the event that you just can’t get a deal done. Knowing your business intimately is never a bad thing.

One of the biggest mistakes owners make, and it’s very easy to do, is to get focused on the transaction instead of focusing on their business. That’s one of the best reasons to bring in an M&A company so they can focus on it for you. But beyond that, you will drive yourself crazy thinking about and obsessing over “what’s going on with this deal?” You’ll also start second-guessing whether you should or shouldn’t do certain things because “a deal is probably just around the corner.” Should you keep recruiting? Should you spend money on leads? Should you do that new marketing program? Should you renew that contract (well, maybe not, that’s a good thing to second-guess)?

Mentally Prepare Yourself

It’s easy to get focused on the process and outcome of the sale. But what’s not so easy is wrapping your head around what’s next for you. When you’re no longer the owner of the business and responsible for/in charge of all of the decisions, what will you do? Will you be able to stick around to see the transition through and NOT feel like pointing out all the things the new owners are doing wrong (differently than you)? Are you prepared for the calls from your former employees gripping about the “idiots” (not you) you just sold to? Are you prepared to wait for a portion (sometimes sizable) of your payout over three or more years? Do you have someone that you’ve been grooming to take over your legacy at whatever company now holds it in their portfolio? Are you ready to actually enjoy life beyond running a business…whatever that is?

Sometimes this is crystal clear in people’s heads. Some owners can list off their bucket list and see themselves riding off into the sunset. Some have very explicit reasons–whether health, family or other–that have gotten them focused on this as a mission. Some are planning to just walk away. Some want to stick around and see things through for a bit. And, surprisingly, some haven’t thought about that at all.

Which one are you? This is an important question and exercise not just for you but for those around you in your life and your business. So it’s crucial that you prepare yourself mentally for what comes next. Are you inextricably tied to your business right now? Is it your identity? WIll you be able to handle people no longer referring to you as that person who runs that business? Selling is one thing, losing your identity is a whole other ballgame.

A few things to keep in mind are that selling your company rarely means a clean break. The minimum expectation is to work through the transition and make sure your top producers don’t walk out the door in the first year. But in many cases the buyer will want you to stay on for some period of time until there’s a rhythm in running the business. And that rhythm has to be theirs not yours. Do yourself a favor and talk to others who have gone through this transition. Listen to their stories and ask them how they got through it. The business transition is one thing, your personal journey is the one that really matters most in the end.

Final Thoughts

Regardless of the path you choose, these steps will be beneficial in your journey. Honestly, sometimes a business is healthier than expected and owners decide…”I can do this!” and keep going. Sometimes your business isn’t worth as much as you thought but there are some ways to get there. Sometimes a key employee or family member steps up and says “I really want to take this over!” Regardless of the outcome it’s always an enlightening experience when you start contemplating selling.

Large corporations generally spend weeks or months every year with specialists combing over their financials, business strategy, marketing plans, and every other dimension of their business. But most real estate business owners don’t have that. So even if you go through this process to come out the other side and say “I’m not selling”, you’re going to come out ahead for the simple fact that you’ve pulled together the information, brain power and analysis to show you what all your hard work has produced. And that’s worth its weight in gold.

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