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Punching Out: New Year’s Goals for Selling a Business

New Year’s resolutions are great because they are so fun to break. So, if you’re planning to sell your business, rather than making fragile resolutions, it’s better to make some New Year’s goals.

Financials: It’s not all about the numbers, but it’s mostly about the numbers. If you are looking for a Mercedes-level valuation, you should have Mercedes-level financials. If your financials are more like a used Datsun, try to upgrade to at least a VW Passat. If your financials are in good shape, you might still consider getting a sell-side quality of earnings report.

Due diligence preparation/other information: We (or your CPA or attorney) can send sample due diligence lists for you to freak out over. It can be overwhelming at first, but if you methodically prepare items one by one, it’s not that difficult. For example, maintaining a current equipment list with all the relevant information can save a lot of time during due diligence.

Add-backs: Many private businesses can add back a variety of expenses to adjusted EBITDA. However, some businesses are more aggressive. Try to limit the number of add-backs to a few easily explainable and justifiable items.

Personnel: With the incoming U.S. administration, it might be a good time to make sure all employees are well-documented. Just saying.

Facility/equipment maintenance: To prepare for a home sale, we usually add a fresh coat of paint and trim the bushes. The business also has to look like it is worth a million dollars (or $10 million, or $100 million) and not have missing lights, beat-up furniture, a pile of goo in the corner, and a parking lot full of rusted metal.

Vision, strategy, and culture: Buyers will often ask about a company’s culture, and the most common response is, “We’re like a family.”  That may be true, but it could be the Addams Family, the Sopranos, or the Waltons. Find out what is unique about the company in terms of vision, strategy, and culture. It’s difficult to figure out if a buyer is a good cultural fit if you can’t explain your own culture.

Personal: This might be the top item. As the owner, you need to think about your goals and plans. Selling a business is a big deal. You don’t want to enter the process unless you are certain. Do you want to stay with the business post-closing and help it grow with the buyer, or hand over the keys after a quick transition? What are your plans for full retirement? After a while, playing golf every day gets old, so it’s good to have some personal goals. Your wife/partner does not want you at home watching M*A*S*H reruns. 

Delegating: It’s hard to let go of the reins all at once. Delegate tasks to the team  one by one. The main thing buyers worry about is key person risk.

Education: Become familiar with the deal process and terms. This helps the owner become familiar with how deals work and the dealmakers’ common language, otherwise you may be paying $500+ an hour for an attorney to explain boilerplate items in the NDA.

Estate planning: Your wealth/tax adviser can help you decide how much you need from the proceeds of the business and help reduce the tax liabilities. It can take a while to set up trusts or charitable donations. You don’t want to call Charles Schwab the day before closing and ask for advice.

Sales and marketing: A business generating new leads and customers will generally receive a higher valuation than a static business. We see a lot of smaller businesses that do very little sales and marketing, and their sales have been flat over time. Word of mouth is great, but buyers will worry that the company is relying on old contacts and legacy customer applications. Businesses should revamp their websites every few years and try to have a few news items per year (I-Connect007 is happy to publish worthy press releases).

Operational improvements: The thing that you were planning to implement before COVID-19? Plan to do it. Stop doing stupid stuff (also known as SDSS). Many owners put off major decisions for years, sometimes just leaving it to the buyer. Every dollar you save drops to EBITDA. Not only is that a dollar in your pocket, but it multiplies at the time of sale. It’s better to make those changes now and rake in the benefits.

Legal/docs: Periodically check all contracts to ensure they haven’t expired. Employee contracts, such as non-competes, may no longer be valid. Have your attorney do a UCC search (almost every deal unveils an old, expired UCC lien on assets).

HR: Update the company handbook. Recheck those I-9s. Can you provide extra training for your employees? Many programs are low/no cost, and they help with recruiting.

Taxes/regulations: Make sure you comply with all taxes and regulations. They change every year, and the fines keep going up.

Customers: Buyers always want to talk to customers, but that makes owners nervous. A customer survey, whether direct or via a third party, can help a business receive great feedback and help stave off that buyer’s request until later.

Expenses/savings: The company should aim to find a few expense savings every year or quarter. It’s always surprising to find various discounts just by asking around or discovering that an expense has suddenly jumped.

KPIs: What are the company’s key performance indicators and how are they being measured? You don’t want to have too many indicators, or the Monday meeting will take until Tuesday afternoon. However, it is good to add or tweak these KPIs occasionally.

Inventory/accounts receivable/accounts payable: Related to the Mercedes-level financials, try to clean up these primary accounts and write off anything old.

Kids/successors: Check in with the kids or potential successors at least once a year to see if they want to take over if that is in the cards.

Advisory team: It takes years to develop a trusted deal team comprising a deal attorney, a CPA/tax advisor, a wealth advisor, and an M&A advisor/investment banker. It’s never too early to assemble the dream team.

Most people break their New Year’s resolutions by Jan. 15 because they are not realistic (like trying to turn a beer belly into a six-pack). Similarly, there is no need to undertake all these preparations at once. However, if an owner focuses on a few key items at a time from January, at least a few will be completed by July.

Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.