The end of the year is a great time for an owner to step back and take a bird’s eye view of the business. Whether you are thinking of selling in 2022 or 2030, taking the time to get prepared and organized will help save time and effort in the future. Here are some items that every business owner should review on an annual basis:
Financials: Every year, a business should try to improve the quality of its financial reporting as well as the speed of reporting. The year-end is a good time to remind your CPA to clean up income statement and balance sheet items that are no longer relevant. If the company has only internal financials, have the CPA do a compilation. If compiled, move forward to reviewed or audited financials. If audited and you are considering a sell, get a sell-side quality of earnings report. If you have any one-time expenses, personal items, or other adjustments to EBITDA, check with your CPA and/or M&A advisor to see what is acceptable, and document those expenses.
Culture: Step back and consider what the company culture is, and how that might be different from your goals. Use the time to reinforce positive culture and eliminate negative culture.
Due Diligence Checklist: Get a sample (and simple) due diligence checklist and see how many of the items are readily available and current. This can save an enormous amount of time, especially if a great buyer suddenly shows up at your door. Work on it a little at a time (or delegate it) so that it is not overwhelming.
Vision/Strategy: When is the last time your company reviewed its vision and overall strategy? Take a few minutes and assess if these are still current and working. If not, make changes.
Personal Assessment/Delegation: As an owner, where are you with your business and life goals? Perhaps there are things you want to achieve but have been too busy doing other things. A leader should spend a good amount of time thinking about strategy and how to implement it as opposed to front-line work. Think about what you can delegate in the coming year.
Peer Groups/Gurus: Many owners join peer groups, engage consultants/gurus, or hang out with golf buddies. It is lonely at the top, so not only is it good to have a social network of other business owners, but it’s good to bounce ideas off people.
M&A Advisor: Check in with an M&A advisor who you trust to discuss trends in the market, multiples, the pros and cons of your business, etc.
Sales and Marketing: Step back and consider the company’s overall sales and marketing strategy. Try something different, eliminate something that’s not working. Be sure you can describe the strategy to an outsider.
Sanity Check: Anything that would not make sense to a reasonable outsider, eliminate. Every company does things just because that is the way it has always been done. You do not want to rock the boat too much, so eliminate one stupid practice every few months or so.
Documents: This comes up in the due diligence checklist, so in case you skipped that, at least make sure your key ownership documents are available and up to date. For example, the operating agreement should be current, and any former owners (and ex-spouses) should be taken out. Check to make sure you have all current stock certificates.
Legal: Make sure all legal documents, such as customer contracts, supplier contracts, leases, maintenance agreements, NDAs, non-competes, etc., are current and in an organized file.
HR: Keep all policies and handbooks current. If the company does not use a PEO, consider making the change. If not using a payroll service, consider using one soon (if anything, to make sure that taxes and other matters are taken care of). Update your org chart.
Regulations, Taxes (Sales Taxes, State Taxes): This can be a major issue in due diligence, as regulations and taxes keep getting more complex. Have your CPA do a review of your policies, and if your CPA does not have much experience in interstate commerce, hire a consultant to review things.
Expense Savings: Have someone review expenses, from paper clips to landscaping to insurance, etc. Especially in these days of inflation creep, various providers will try to raise prices without telling you. Every dollar you save goes to the bottom line, which is multiplied by the deal at the time of the sale.
Website, Social Media: If your website looks like it was made in 1995, it is time to invest in a new one. It is one of the things that most new customers and potential buyers will look at first, so make sure it looks professional, has accurate information, and works. If you have news, blogs, or social media posts, keep them as up to date as possible.
People: Keep checking in with your people to see if they are growing along with the business. Although they may complain, employees like to grow.
Inventory: Keep inventory current. If there is a “pot of gold” of obsolete inventory, be sure that it is organized and easy to access.
Maintenance, Cleaning: Step back and see what needs to be painted, cleaned, or thrown out. If a great buyer calls and wants to visit tomorrow, it is tough to get everything cleaned up in a few days. Also, your employees will appreciate working in a clean, well-lit, and positive environment.
KPIs: Be sure that Key Performance Indicators are kept current, organized, and in a state of improvement.
Estate Planning: Be sure that your wealth manager and estate planner know your goals, including what you might want to give to charities and kids/grandkids.
Check in with the kids (and key employees): The holidays are a good time to see if the kids really do not want to take over the business or if employees could be interested in taking it over. You do not want to find out the day before closing that the kids always thought they would take over the family business.
It is not possible to plan everything or take on the whole list at once. However, if an owner chips away at this list and improves things gradually, it will help improve the company’s valuation and make any sale a much smoother process.
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.