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to discover the steps you need to take to prepare your business for sale. Five to 10 years pre-sale During this time you should review your corporate structure and its potential impact on the transaction. Most buyers are only willing to enter into asset purchase transactions for a multitude of reasons. Selling a C-Corp in this manner results in taxation at both the corporate and personal level. This means you could end up paying 15 to 20 percent more taxes when all is said and done. In order to avoid this situation, businesses need to elect to transition to a more favorable tax structure. In most circumstances the Internal Rev- enue Service (IRS) requires this be completed five years or more before the business is sold, otherwise the transaction may not receive the more advantageous tax treatment. Your certified public accountant (CPA) or tax adviser should be able to walk you through the process. Ownership issues also need to be addressed. If possible, owners that are not active in the business should be bought out. When the time comes to sell, you don't want to be held hostage by a former partner, ex-wife or retired parent. These are impediments to buyers and need to be avoided. T his is also the time when you need to consider mov ing certain assets out of the cor poration. T his could include real estate, land, trademarks or subsidiaries that you don't intend to sell w ith the primary business. Three to five years pre-sale This is the period of time when you want to build a company that can sur- vive and thrive without you. Buyers want to know that the business can continue to grow and flourish with- out the departing owner. Now is the time to build a manage- ment team that can run the business on a day-to-day basis. It is vital to del- egate the responsibility and author- ity to your middle managers so that they can gain the experience neces- sary to be of value to an acquirer. With their assistance, processes and controls can be implemented in the business, which provide a buyer with confidence that the business is well run and sustainable into the future. It is also advisable to have a pro- fessional valuation of your business completed in this time frame. The valuation will provide you with a starting point for the consideration of a sale. Comparing this initial valu- ation to your goal will help you to further assess the work to be done and the required time to completion. Begin to look at your financial statements with a buyer's eye. Ask yourself these questions: • Are sales growing consistently year-to-year? • Are gross profit margins improv- ing or declining? Mike Kelner is the founder of Vending Biz Broker LLC, a full service merger and acquisition firm serv- ing the vending, office coffee and bottled water industries. He can be reached at mike@vendingbizbro- ker.com or 704-942-4621. February/March 2017 VendingMarketWatch.com Automatic Merchandiser 25 B U S I N E S S B A S I C S