The sale of a business must be planned and implemented following certain guidelines.
Experts recommend a three-year planning period whenever possible, to give owners the necessary time to position a business sale.
While putting yourself into the buyer’s shoes is a great place to start, providing instant insight about how your business will be judged by a prospective buyer, there are proven steps to take that will promote high offers.
Here are some tried and true steps to consider
* Establish Goals for Selling the Company
* Review Financial Statements
* Analyze Business Cycle Movement
* Stengthen Balance Sheet
* Remain Active in Company
* Establish Owner Objectives for Selling
Planning to meet owner objectives is of paramount importance. If an owner is unable to verbalize what his goals are for selling, then it will e impossible to structure a deal that will satisfy him.
Deciding on a dollar amount is a good place to start. How much cash does the owner need to walk away? Will owner financing be acceptable for part of the payment? Is the owner available for consulting after the sale? Will the owner consider staying on as an employee?
These are all important questions that must be answered before devising a plan for selling the business.
One of the most important tips to keep in mind when selling a business is to keep this information private. If the employees and managers get nervous about the possibility of a sale, it will negatively impact operations.
That is the worst thing that can happen prior to selling.
Review Financial Statements
Meeting with a CPA that is not an employee to discuss the company’s financial statements is a good place to start when preparing for a business sale.
It is no secret that prospective buyers will want to see these important documents.
Assessing strengths and weaknesses is crucial so that a plan can be devised to improve the areas that need some attention.
Considerations that should be evaluated in detail include debt load, assets and cash flow. It is also crucial that all financial statements be up-to-date.
Buyers need to believe that the company is on top of financial reporting to feel secure about the health of the company.
Analyze Business Cycle Movement
Businesses are either growing or slowing down. As can be expected, buyer want to buy a business on an upswing. For this reason, owners must set an upswing in motion if the company is experiencing lower revenues or profits.
The introduction of new complimentary products and services is one way to initiate impressive growth as long as excessive debt is not incurred to achieve this goal.
Strengthen Balance Sheet
Assets are king when it is time to determine the value of a business. Owners must keep this fact in mind as they plan for a sale. Tangible assets in particular are attractive to buyers since they can use them to seek financing in the future if necessary.
Beefing up assets and getting rid of deadbeat customers appearing as old debt are two of the best ways to improve a balance sheet.
Remain Active in the Company
While it is emotionally challenging at times to stay mentally engaged in a company being sold, owners must realize that it can take several deals before one is finally consummated.
At a time when owners are often ready to “go fishing” and move on, it is more important than ever to stay on top of the business.
Conclusion
Selling a business online, privately or with a broker is an emotional experience. Savvy business owners know that the better they prepare for the sale, the more money they can expect to net when they successfully sell a business.
As one of the most important decisions of a person’s life, owners must be committed to proven strategies to fetch the highest offer.