The path to selling your business can be littered with emotional and financial landmines. Ted Maduri and Andrew Lord of Davis LLP reveal how to avoid the things that could derail your sale

Avoid black marks

It's a lot like selling your home: the first thing you do to get full value is to improve the curb appeal, but then there's the mechanical aspect of making sure your roof isn't leaking or your furnace isn't broken. Try to avoid all of these black marks, because if a buyer is going to pay you X for your business, but finds black marks, they're going to want to deduct those costs. Keeping books and records won't get you more for your business, but lacking a good document-management system will ding you on the purchase price.

Create strong contracts

Contracts are important and in order to get full value you need to be able to transfer those contracts—if you can't, you're not going to be able to get full value for those assets you've built. We've seen deals where a buyer will ask for all of the signed contracts, and then it's a full-on panic to get signed copies of those contracts. That's something you need to be systematic about from the start: make sure you save a hard copy, and then you have it all readily available and you won't be struggling to find signed copies five years down the line.

Minimize litigation

When there is litigation out there, imaginations run wild and buyers will draw conclusions that will make it much worse than it really is. It's incumbent on business owners to deal with their litigation as it comes up and not have many pieces outstanding. Again, you won't get more for your business for controlling litigation, but you sure as heck can get less for it if you have issues outstanding. It can also be more difficult to settle litigation reasonably on the eve of a sale, as opposed to a year or two before.

Have employees sign

Having a standard employment agreement—or having different levels for different departments—is really important and doesn't need to cost a fortune. Get a standard form and make appropriate tweaks for different employees in your organization. That's true of contract employees, as well. If you hire someone to create a piece of intellectual property for you, without a contract it won't be clear who owns it.

Previously published in the BCBusiness magazine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.