Eight million or so businesses will be sold by retiring baby boomers in the next 10 years, according to business experts.

If you own a privately held or family-owned company, you may think you have much time to prepare for sale.

The laws of economics may tell you otherwise if you care about your ability to sell and the price you get. A glutted business marketplace spells bad news for sellers.

How do you get ready to successfully sell your business before the coming buyer's market?

Sell sooner than later

As an overloaded business owner this simple advice may be awfully hard to follow.

However, if you focus on the fact that sales prices likely will be lower in a glutted marketplace, you are more likely to get going. Do not delude yourself that your business is the only business providing certain goods or services, and you have years to get ready.

Take proactive steps

Actions you can take every day include:

- Defer expansion if it will take years to show a profit.

- Reduce unnecessary expenditures, particularly administrative costs.

- Clean up accounts receivables. Buyers will not buy them or will require you to indemnify them if those accounts are not collectable. Sellers want to see a clean balance sheet without old, uncollectable receivables.

- Eliminate obsolete inventory, if you have any.

- Look at your gross revenue numbers. Can you increase them? Can the sales price for your goods or services be increased?

- Can you eliminate unprofitable aspects of your business? Can you increase service charges? What about increasing the minimum charge for your service fees?

Concentrate on customers, contracts

Business sellers will tell you that the actual sales period is all-consuming and adversely affects their sales, marketing and operations. You will not have time to buff and polish your business shortly before you embark on the sales process. So what can you do now until you start on the formal sales process?

- Get and keep contracts from current customers. While it may be obvious, you should have those contracts. We have seen countless companies who have outdated, missing or nonexistent contracts with customers. Buyers will discount both directly and indirectly for sloppy contract management. After all, do they know what seller really has as a customer base, let alone revenue when seller's contracts are missing in action?

- Get multiyear contracts from vendors and suppliers if this will help contain costs prior to the sale of your company. Can your customer contracts be assigned to a buyer? If there are prohibitions, restrictions or notice requirements, this can severely impact the sale of your business. Remember the buyer is looking for a smooth transaction where assets, including customers, can be readily transferred.

- Avoid sales to only a few customers - diversify. We have seen sellers lose a sale because their giant customers pulled the plug on contracts before sellers were able to close on the acquisition of their company.

- Get nondisclosure, proprietary and inventions agreements with your employees. The value of your technology and/or trade secrets is greatly diminished if you have not protected that intellectual property with such agreements.

- Get employment agreements with key management that contain covenants not to compete (make sure they comply with the state statutory requirements) and that resolve any compensation or company ownership issues.

The last thing you want is a key person negotiating with you regarding compensation, ownership, etc. while buyers are leaning on you for price reductions.

- Key management employment agreements may need to contain multiyear bonuses, some portion of which is deferred until a manager retires or after the sale of the business. These golden handcuffs can sometimes be an effective way to keep key management from leaving before you sell the company and provide you with critical help in that sale.

Company records need to be found and organized. Corporate minutes will be required. If you don't have them, contact a corporate lawyer so they can be properly done without improper backdating or fabrication. Get your corporate stock ledger updated, and get it reviewed by that same counsel. Check the Secretary of State Web site to make sure you are indeed in good standing. Also, check to make sure outdated liens and UCC filings have been removed from government databases. Sellers often comment on how exhaustive buyers are in poring through company records on items ranging from employee documents to governmental filings and permits.

The sales of businesses are cyclical - they ebb and flow based upon interest rates and the availability of capital. Add to this mix the huge number of boomer businesses expected to sell in the next 10 years due to retirements and demographics.

Smart sellers are getting ready now before the boomer rush to sell begins.

Joyce Colson and Rob Quinn are partners in the Boulder law firm of Colson-Quinn. Colson-Quinn represents established business companies and emerging-growth companies in a variety of areas, including general business, technology and intellectual property.