If you own a small business, it is likely one of your biggest (if not your biggest) asset. If you are thinking about selling your business, you need to put a lot of thought and pre-planning into the endeavor to ensure a smooth and successful transaction. There are numerous variables involved with a business sale and many factors that must be considered. Here are four important considerations when preparing to sell your small business:

Begin the Planning Process Early: Business sales do not happen quickly. The process can take up to a year or longer to prepare and locate a qualified buyer. For this reason, it is good to start the planning process a couple years ahead of time if you can. This gives you time to fully prepare, and it gives you better negotiating leverage because you are not desperate and in a hurry to close out the deal by the end of next month.

Upgrade your Communications and Technological Systems: Prospective buyers will want to know your business has the most up-to-date technology and systems to run the operations efficiently. The last thing a buyer wants is to have to upgrade the systems after the sale and while they are getting familiar with the new business. Fully examine your communication systems and other technology (with the help of an IT professional if necessary) and identify areas where upgrades are needed.

Another area you may need to look at is the security of your computing networks. Hackers are targeting small businesses today like never before; make sure you have a strong firewall, anti-virus program and other essential security in place to protect your confidential and sensitive company data.

Organize your Bookkeeping and other Information: Poorly organized bookkeeping sets off red flags in the minds of prospective buyers. If buyers have difficulty understanding your financial data, they will assume it will be equally difficult to perform the rest of their necessary due diligence. In fact, if the trust factor between buyer and seller is shattered, buyers will be skeptical even when you provide answers to questions that would otherwise seem perfectly reasonable. Meet with your CPA and properly organize your accounting and financial data and make it as easy as possible for prospective buyers to perform due diligence.

Consider the Tax Implications of the Sale: There are numerous ways you can structure a business sale, depending on your entity structure and other factors. For example, you can receive a lump sum payment from the buyer or installments over several months or years. In some instances, you can structure your sale as either an asset or stock deal. The way you structure the deal will have a major impact on the tax implications of the sale.

To ensure you are minimizing your tax liability, speak with your tax accountant and review all potential scenarios to decide which is best for your business.