When it comes to selling a client’s business, timing matters.

If your client is thinking well in advance

Entrepreneurs should tell their accountants as soon as they start thinking seriously about selling. There are many tax implications of a sale, and it takes time to ensure the company and its ownership is structured to maximize after-tax proceeds.

Probably the most consistent benefit for any Canadian selling a business is the Small Business Capital Gains Tax exemption for the first $800,000 of proceeds resulting from the sale of shares. This tax-free exemption can be attributable to Canadian resident shareholders, provided they’ve been shareholders for at least two years and the company meets certain other tests.

Read: Sell a business and reduce taxes

Then, discuss the prospective sale with stakeholders. If they are planning to sell in a few years’ time, advise your clients not to surprise their minority partners, family and managers. Usually a sale benefits everyone involved. And, if clients need unanimous shareholder approval for a sale, they should sort that out with fellow shareholders well in advance.

One to two years in advance

Business owners have a tendency to charge certain non-business expenses to their companies, thereby decreasing the amount of tax they have to pay. This will cause a problem when the company goes up for sale since buyers use profitability as the primary measure of what they’ll be willing to pay for the business.

Considering the purchase price will usually be a multiple of pre-tax earnings (plus interest and depreciation), anyone thinking of selling a business in the next year or two should minimize these personal expenses. This cuts down on uncomfortable discussions about how the earnings should be normalized. And the increased tax paid in the short run is well offset by the multiple paid on the earnings.

Read: Business owners need succession help

Running a business is usually a hectic, all-consuming activity, so corporate recordkeeping can suffer. But for a sale, owners must get their files and records in tip-top shape. If not, they’ll be penalized in the due diligence process.

The length of this process means entrepreneurs should hire a transaction advisor to help get the documentation organized. Prospective buyers will investigate products, customers, outstanding litigation, environmental issues and so forth. An advisor will prepare the vendors for these upcoming questions.

Buyers don’t like companies that are dependent on the owner to operate on a daily basis. A business owner needs a management team with enough independence to run things in the owner’s absence. Having good systems that automate the business will also help the sale process.

Just prior to sale

Once the decision’s been made to sell, it’s time to hire an advisor or agent to manage the sale process. This shouldn’t be the company lawyer or accountant. It needs to be someone who specializes in selling businesses without conflicts of interest.

Read: Help business owner clients sell out

Few people sell their houses without a real estate agent. Selling a business is significantly more complicated. Advise your client to hire someone with a long track record, good references and knowledge of the industry in which the entrepreneur is working.

That agent will work with the seller to assemble an extensive document called a Confidential Information Memorandum, which summarizes all aspects of the business. He or she will also work with the business owner to put together a list of prospective buyers. After these steps are completed, the company is ready to go to market.