Preparing Your Business for Sale - Part 1

Here’s where preparation has the biggest payoff. The asking price is what you hope for; the sold price is what the market will support. For small businesses, the gap between the two is often 10–25% Plus especially when sellers overvalue their business based on emotion rather than numbers.

Why does this gap exist?

• Sellers often set prices based on what they need (to retire, pay off debt, or fund their next venture) rather than what the business actually earns.
• Buyer’s discount offers if financials are incomplete, leases are shaky, or liabilities surface during due diligence.
• Financing realities matter — lenders approve based on EBITDA, not potential. If your financials do not prove earnings, the buyer simply cannot pay your asking price.

When preparing to sell, it is important to think about the terms you are willing to offer, not just the price you want. One option is a Vendor Take Back (VTB), where you finance part of the sale for the buyer. For example, if your asking price is $600,000 and the buyer can only secure $500,000 from the bank, you may agree to carry a $100,000 VTB loan.

This does not mean you are giving money away — the buyer pays you back with interest. But it does mean you are tied to the deal for a period of time. Some sellers use this to close the gap between asking and sold price, while also generating extra income from the interest.

By considering options like VTB upfront, you will enter negotiations better prepared and avoid surprises later in the process.

Preparation reduces this gap. When you walk into negotiations with clean financials, a solid lease, and transparent operations, you give buyers fewer reasons to push the price down. That means more money in your pocket at closing.

1. Financial Organization
- Update bookkeeping, reconcile accounts, and prepare 3 years of P&Ls, balance sheets, and tax returns.
- Remove personal expenses from the books (cell phones, travel, family wages) — or clearly document them as add-backs.

2. Lease Review
- Check expiry dates, renewal options, assignment clauses, and rent escalations.
- Buyers often need landlord approval, so deal with renewals or negotiations early.

3. Legal and Compliance
- Ensure business licenses, health and safety certificates, and insurance policies are valid.
- Clear up outstanding fines, disputes, or CRA/WCB/GST issues.

4. Operations and People
- Document staff payroll, schedules, and procedures.
- Create an operations manual (even a simple one).
- Keep key employees informed when appropriate — stability reassures buyers.
- Update trades and vendors list.
- Prepare a list of utility accounts, including phone and internet providers, along with their account numbers.
- Prepare a list of intellectual properties e.g. social media account names and passwords.

5. Premises and Equipment
- Fix broken equipment, paint walls, declutter.
- Prepare a clean asset list with serial numbers and service dates.

Preparing to sell is not about paperwork. It is about realizing you are not only selling equipment and cash flow. You are selling confidence. A buyer wants to believe they are stepping into a business they can run successfully from day one. The smoother you make that transition, the closer your sold price will be to your asking price.