Deciding to sell your business is a big decision, and like every life-changing decision, it requires thoughtful planning. Here are some tips for owners who might be thinking about selling, even if you believe it’s years down the road.

You’ll need a clear vision for your exit from the business.

No matter how far off you think you are from selling, it never hurts to start planning early. We believe in starting the discussion about a sale at least three years in advance.

You’ll need to have a conversation with your family about what retirement (or whatever your next phase is) looks like. Your profit from the sale will have to finance that lifestyle for years, perhaps for the rest of your life. Thinking through the math should involve your financial planner, your accountant, and your estate planner. If your company won’t provide the value you’ll need, planning in advance gives you time to grow the business and get to your target number.

Make sure your bookkeeping gets cleaned up.

Your accountant will help you determine how much work it will take to get your books organized and in order for the diligence process that a buyer and the lender will perform. There’s a big difference between the mindset of an owner and the mindset of a seller. Owners generally work hard to manage their tax liability, so they often run personal expenses through the company. When you get ready to sell, you’ll want to make sure all your business expenses are accounted for accurately and not co-mingled with your personal ones.

If you own multiple units of a franchise, it will be important for a buyer to see the numbers for each unit as a separate business. You can also become diligent in allocating expenses separately for each unit, especially payroll. If you have employees who work in more than one location, make sure they clock into each unit they cover. (This will also keep higher salaries, like a manager’s, from affecting the profitability of any single unit.)

Speaking of payroll, many owners, in an excess of pride of ownership, sometimes inflate the hours they or their spouse spend working in the business. It may seem counterintuitive, but it’s in your best interest as a seller to have an infrastructure in place to minimize your involvement in the business. Buyers are looking for an opportunity to make money, not a full-time job (or two.) Planning ahead gives you time to train staff and pull back from working in your units. Reducing your hours will increase your company’s value when you sell.

Get a clear understanding of your company’s value in the market.

A broker with experience in your industry will usually provide a preliminary opinion of value at no cost to you. They will also have a database of prospects who are looking to acquire a business like yours.

If you own multiple units, you may have to prepare to break them up to sell them. Some franchisors are reluctant to assume the risk of a new owner taking on multiple units, especially if they are new to the industry or have not managed more than one unit of a company before. That’s another good reason to have each unit’s books organized and expenses allocated separately.

There are other ways to increase your company’s value and attract more and better offers for your business. We would be happy to help you plan your exit strategy.