Top 10 Ways to Prepare Your Company for Sale

Hello and welcome to theDailyBlunt, today is Friday, September 1, 2017 and will be all  day.

Today we're talking about the Top 10 Ways to Prepare Your Company for Sale

Question:  What do I need to sell my company?  What if it’s just the license?

Answer:   Buying or Selling a Cannabis Company takes 12 times longer than most any other business to sell.  Why?  The state has to process everything and that takes them time.

Instead of waiting to the last minute to pull together items (that may or may not even exist!), take  the time up front to get yourself prepared.  Here are

  • KNOW WHAT YOU ARE SELLING.  It seems obvious, but it’s not.  Are you going to sell 100% of your company?  Can you only sell 99%?  Are you going to sell only 20% for a quick infusion of cash?  Think this through in advance.  How is a buyer supposed to know what to offer, if you don’t know what you are selling?
  • WHO CAN SIGN?  This should be addressed in the company documents below, but you’d be surprised how many agreements someone used from the internet that don’t actually reference who has the ability to buy or sell the company.  Make sure your agreements are ready, even if it is just an agreement with yourself.
  • LICENSES.  Get a copy of your business license from the state, city, county, health department, you name it… whatever licenses you have, put them together complete with expiration dates (if applicable) and the jurisdiction they are in.
  • COMPANY DOCUMENTS.  While the articles of formation, operating agreements, and options to purchase may not seem exciting to you… they are very important to a buyer.  Have those documents completed, signed, and ready to go to any attorney for review.  You’ll need the in order to get to the purchase stage…. So don’t waste time here.
  • LOCATION DOCUMENTS.  Let’s talk about the real estate.  Is it leased?  Is it owned?  Get a copy of your lease agreement, assessors tax data, parcel number, etc.  You’ll also want floor plans, sketches, and photos for the location that you are in.  This is another necessary item for a complete purchase agreement.
  • INVENTORY & STUFF.  It’s gonna suck, but take the time up front to list out the inventory that is included with the purchase.  You’ll have 1 list that you use at the very beginning and then you’ll update this list right at closing to confirm what is left or if it has been sold already (like products that change, or even sometimes equipment that you don’t need anymore).  No one likes this part, but trust us, it’ll save you a lot of headaches later if you just do it up front.
  • FINANCIALS.  Any buyer, partner, or investor will need to see your company books.  That means get your tax returns, profit & loss statements, and balance sheets ready.  They’ll be components of your purchase agreement… just like everything else that is required to sell.
  • DEBTS.  Get together a list of all your debts.  That means private notes from friends.  Mortgages on the property.  Loans against equipment.  Any back due rent or payments.  Employees wages that are behind.  A buyer who is purchasing the company needs to be sure what items are included, what will be paid at closing, and what items will be paid but outside the transaction.
  • LEGAL STUFF.  The deeper we get into this industry, the more complex and creative it can become on paper.  Are there judgements, liens, court orders?  Any pending lawsuits or threats?  Even if they aren’t related to the business, you’ll still need to disclosure those is they are personal.  They’ll be found out eventually during the feasibility phase, so it’s better to disclosure them up front than try and hide it until later.
  • AIR YOUR DIRTY LAUNDRY.  Lastly, get ready to air your dirty laundry.  If there is anything that haunts you, then you should disclose it.  Is there a lawsuit that has been dragging out for years?  Are you behind on your taxes to the IRS?  Have you failed to file a tax return or extension?  Are you behind on rent?  Whatever it is… disclose it.

Does this seem like a long list to put together?  Yeah, it does.

It is necessary for a smooth transaction?  Absolutely.

If you need help compiling your documents, we have resources and attorneys who can help.  

 Give us a call at (206) 466-4020 or and we’re happy to discuss how  to help you move forward.  For a list of references you can access directly, sign up as a  premium canna subscriber and we will have everything available at your fingertips.

Jennifer Hudson