Regardless of the state of the economy and of your industry, there are any number of things that you can do to improve your business's appeal to buyers before the sale. The main problem is that a lot of these things take time. If you need to sell right away, you're not going to be able to add much value. Consequently, it's possible that a lot of the potential value of the business will go down the drain.

Improve your income. Since cash is king, the most essential step you'll want to take is to clean up your income statement. One way is to have your accountant recast your financials to reflect the way the company should look with new owners. However, some buyers (particularly larger corporations) are turned off by this procedure. They will judge you only by your true, audited financials. If you want to be able to hook these buyers you have to clean up the business itself, not just the statements.

Basically, this means doing whatever it takes to increase your EBIT (earnings before interest and taxes). This may mean something as simple as increasing your advertising expenditures, hiring another salesperson on a commission basis, or keeping your store open an extra 10 hours per week to generate more revenues, and taking a hard look at your expenses to see whether you can reduce them. For example, this may be the time to drop some of the perks the business provides to you or your family members. You may also want to have your accountant capitalize certain items that might otherwise have been expensed, and review your depreciation and inventory reporting methods. Ideally, you'd start working on this three years before the sale, since most buyers will want to see three years of financials.

Improve your assets. Also take a good look at the assets of the business. Certainly, you'll want to sell off or dispose of any unproductive assets or unsalable inventory. The buyer won't want to pay you for them, and they will only drag you down — better to get what you can from them now, and write off any losses that may result. The business may own certain assets that are primarily there for your personal use (the most common example is a company car) but that you want to retain after the sale; now's the time for you to "buy" the asset from the business, perhaps at the current book value.

If the business owns real estate, you might consider removing it from the business and placing it in a limited partnership, so that it will not be transferred in the sale. You can continue to lease it to the new owners, or to someone else, and retain an income stream. This is a judgment call — for some businesses, the real estate provides the main appeal to buyers and you won't get much for the business without it. Your business broker should be able to tell you whether this is true for you.

Another move you may want to make is to replace any machinery that's nearing the end of its useful life, and do any necessary repairs and upgrades. The average buyer wants to purchase a turnkey operation, meaning that all they have to do is walk in, turn on the lights, and the business will operate with no immediate need for investment on their part.

You'll also want to metaphorically put a new coat of paint on the entire place — not that you should spend a whole lot of money on this, but be sure that your location is clean, your landscaping is fresh, any areas open to the public are decorated appropriately, etc.

Clean up potential liabilities. You should make an effort to clear up any pending or potential legal problems, such as product liability claims, employee lawsuits, IRS audits, insurance disputes, etc. A buyer who purchases only the assets of your business (instead of corporate stock) generally won't get stuck with inherited legal problems; however, the very existence of lawsuits or other problems may raise red flags in potential buyers' minds or even turn them completely off.

One concern that buyers increasingly have is whether there might be any lurking environmental problems on your property. Where problems turn up, it's possible that any and all former owners can be held accountable by the government for very expensive cleanup costs.

If real estate will be part of the sale of your business, you should make every effort to see that there are no leaking underground storage tanks, asbestos, lead paint, hidden hazardous waste, or other nasty surprises around the property. If it's reasonable to conclude that problems are unlikely, an environmental transaction screen conducted at your attorney's direction may be all that's necessary.

However, to be safe from future claims, you'll generally have to obtain a satisfactory Phase I environmental audit by an environmental consultant. The Phase I report will document the clean condition of your property at the time of sale, and provide evidence that any problems must have been caused by subsequent owners. The price of an audit depends primarily on the amount and type of real estate your business owns, but can also vary among environmental professionals. Like any other major expenditure, you should get estimated bids from several licensed consultants before hiring one.

If problems turn up during the Phase I audit, a Phase II environmental audit may be required to investigate the problems and determine how to clean them up. If it turns out that problems are so extensive that you can't realistically fix them before the sale, you'll probably have to reduce your asking price for the business. As an alternative, you may want to consider trying to sell the business without the problematic assets. Simply not telling the buyer about existing problems is not an option; in fact, a number of states require you to sign a disclosure form that reveals any and all problems you know about. This is one area where your lawyer's advice will be very important.