Selling a Business — The Final Stretch of the Marathon
Building a business is like running a marathon, not a 40-yard dash. It requires hard work, a well-conditioned work ethic, a high pain threshold,and taking measured steps one mile at a time. But remember to save some kick for the final stretch to the ultimate goal…….the exit.
If you want top dollar for your business, you can’t appear to be coasting listlessly to the finish line. So how can you kick your business into a higher gear during the last few months or years of ownership?
Visit Your Accountant.
Remember your silent partner…….Uncle Sam! Before negotiating any deal, it’s important to understand the tax implications inherent in a business transfer transaction. Make sure all tax obligations and filings are current and your business accounting records are clean for potential buyer review. Accurate financial statements not only adds to a buyer’s comfort level, it more likely will result in a higher sales price. A potential buyer is typically looking for a predictable cash flow from the business. Three, four or five years of professionally prepared financial statements and tax returns will show them that.
Understand Who Your Buyers Are
There are three types of buyers for your business: financial buyers, strategic buyers, and individuals. Financial buyers include private equity or “buy-out” funds that take a controlling interest in profitable businesses that have the potential for another good growth spurt. Strategic buyers can include any business that would benefit operationally from owning your business. Think of large customers, competitors or regional businesses that need to expand their manufacturing capabilities.
Consult With A Business Brokerage FirmPrep your company for sale. In the same way that homeowners spruce up their homes before talking to Realtors, business owners benefit when they have the opportunity to unload unprofitable or slow-paying customers, cut unnecessary expenses, and build up areas of perceived business value. Explore opportunities to develop longer-term customer contracts and level out erratic revenues. Do everything you can to build consistency into your company’s financial and operating performance.
Select Your Support Team
Take good care interviewing professional advisors that will represent your company during sale negotiations. Also, if you decide to hire an investment banker or business broker to solicit potential buyers, make sure the intermediary has the prestige and expertise to represent your company well. The key to a good intermediary is proper deal-positioning and the ability to get return phone calls and help your company cross the finish line on a high.
For entrepreneurs in any industry, selling a company they have built from scratch is rarely easy. But the heart wrench can be lessened if the small-business owner takes an active role While most deals take several months to close, small-business owners should start preparing their businesses for sale several years in advance by fine-tuning operations, auditing finances and cleaning up facilities. Still, no matter how tidy the facilities or the books, deals often come down to mutual understanding.
Moving on – How to Make your Business a Worthwhile Purchase
Look after any property you have – if you sell a business as a going concern, appearances are everything. A smoky shop or workshop does not give a good impression, nor does a pile of spare parts littered on every surface.
Maintain a good reputation and a good credit score –pay your bills on time, deliver what you say you are going to, and conduct your business with professionalism,
Find out as much as you can from others who have done the same – what made Google want to buy YouTube?? Potential – and that’s where you can compete with the bigger businesses!