Your business is running along just fine, turning a profit. Clients are happy. But you must ensure your business looks as good from the outside looking in as it does from your perch inside. How would it look under the microscope of a potential buyer doing their due diligence?

A good, hard look at key business processes, assets, and contracts can save you headaches and stress when serious negotiations begin, not to mention holding or increasing your business’s value.

Financial records and reports, employment contracts, intellectual property arrangements, business legal structure, and family ownership arrangements are some key areas that need extra scrutiny when considering a sale.

The retention of executives is often enticing to a potential buyer. They will need someone who knows and understands the landscape of your company. Will those executives stay on when they discover a change of ownership is coming, or will they move to a competitor? What’s the incentive to prevent them from abandoning the ship instead of helping with an orderly and successful transition? Be sure to take a good, hard look at crucial employees’ contracts to ensure they will be there after the sale.

Financials are the holy grail of business sales. We know numbers don’t lie, so ensure your financial statements are ready for scrutiny. Do they reflect the latest GAAP accounting methods? Has a respected CPA firm checked them? Sometimes it’s best to rely on someone other than your internal accountants; potential buyers may feel more comfortable with an outside firm doing the review.

Intellectual property arrangements are often overlooked when preparing for a business sale. It’s a mistake that can significantly diminish the value of a company. Intellectual assets are often the most important asset a business has. You must ensure all of these contracts have been reviewed by an intellectual property attorney. These arrangements must be in writing, and it must be clear who owns what. If not, it can make for complex negotiations with a buyer.

Before beginning the sale process, ensure the business’ legal structure is efficient. It’s simple to tidy up the business structure, avoid paying more tax than necessary and simplify the transaction.

It’s always important to review any family ownership arrangements. Consideration of transferring some ownership to heirs in advance of the sale could result in solid financial and estate planning results.

Attempting to assess a multi-faceted business can be confusing and create problems in marketability and valuation. While you understand the integration of divisions in your business, an outsider may not, and realistically they may only be interested in one division they find attractive and valuable. When that happens, if they need help understanding the totality of your business, some divisions could become a liability and may impact valuation and, in the end, the sale of the company.

Suppose you do a good job of separating assets into natural business divisions. In that case, potential buyers get a clearer picture of the value of the entire business and may be willing to pay more.

You may need or want to retain part of the business, which in the end, could provide a steady cash flow for you and your heirs.

We understand that it’s your business and you want to be involved in the sale, but experience says it is best to hire an outside group to come in and help facilitate the sale. The truth is many business owners are their own worst enemies when it comes to selling their businesses.

Let’s face it; most businesses don’t have someone on staff who has the experience needed for the significant transaction of selling a business. Lack of knowledge and/or experience in such a sale can lead to negotiation problems, delays in the process, and a less favorable outcome.

Once you get your team in place, let them do the heavy lifting. You need objectivity and detachment when you are selling your business. That means paying attention to what is happening in the process. You can stay informed and offer advice without controlling the process.

It’s understandable to go into the sale of a business with a price set in your mind and not budge. But as odd as it may sound, that price stubbornness can prove costly. 

Do your best to figure out who wants to buy your business and why they want to buy it. Look at your business through their eyes and determine how it fits into their overall strategic plan—answering these questions can up the price.

Even Superman has vulnerabilities. But sometimes, as a proud business owner, we think our business is perfectly safe, and it can be challenging to be critical of what we created.

Before a sale, you and your team must take a realistic look at your company. Don’t overlook operational flaws; embrace them. And search for more. Eliminate what you can before the sale, and own and disclose those you can’t. This allows you to control the message to the buyer rather than allowing them to discover flaws after the sale, creating a possible liability.

Forget the 30,000-foot view when preparing a letter of intent (LOI). It must be up close and exhaustive, including everything that has meaning to you. If you sign the LOI when it lacks all the appropriate items and details, it could erode the value of your deal.

If the LOI isn’t all-inclusive, you will be in the difficult position of negotiating after the fact, and that’s not a good position.

The impending sale of a business can be an emotional time for your team. Emotions will run the gamut from excitement to stress to curiosity. It will be hard to focus on the now and successfully run your business until the sale is final.

Your business must run smoothly, meeting all financial expectations until the sale is final. All too often, the culprit in weak performances leading up to the sale is the management team’s focus on the deal and not the business.

Poor performance heading into the deal can be costly. In your strategic plan, clearly outline who is managing the business versus who is working the deal and ensure everyone stays on track.

Tax exposure is yet another area where due diligence is crucial. While you may have already filed your federal tax returns and written a check for what is anticipated, there may still be tax exposure for you in the sale.

Often businesses consistently pay taxes due within their locality and state, but other jurisdictions of business may be overlooked.

Often buyers want funds placed in escrow to offset the potential liability exposure created by unpaid taxes. Sellers may not like this stipulation, but it keeps the liability from being discovered after the deal closes. Doing this protects you, the seller, from an expensive worst-case scenario.

The sale of your business is the biggest piece of this puzzle, but don’t forget a piece vitality important to you: make sure you have a financial plan for after the sale. You’ve just sold one of your, if not your, most valuable asset, so make specific plans for other long-term financial goals.

Make sure you put an investment plan in place that will replace the income you had from your business. Consider whether you should take more or less cash at closing or have an earn-out period. What type of cash, stock, or other deal do you expect from the new owner? While you’ve spent years making solid decisions for your business, now is the time to make the best financial decisions possible for yourself and your family.

And, of course, with financial planning comes tax planning for you to research and understand thoroughly.

Once you’ve sold your business, it doesn’t always mean you leave your business. Before the sale closes, you must decide if you want to stick around, be an employee, an advisor, or a board member. But these decisions must be made between the owner and buyer before the sale. A handshake deal isn’t enough. Ensure it is in writing and your legal team has reviewed, if not crafted, the plan.