The following is the first in a series of points to keep in mind for selling your business.
You have run a business you have built for many years. It has been the American Dream. You also know how much work you put into making the business a success. You have missed anniversaries, taken vacations where you worried about what occurring at work, rogue employees getting into mischief, and being your own cleaner, lawyer, plumber, electrician and accountant – all one Saturday morning.
So – your task over the next period of time is to normalize your business to prepare it for sale. What does this mean? You need to run your business and keep records of your business in such a way that will be expected by any buyer.
Step One – reduce the owner perks and pay yourself a salary. Yeah – we are all smiling about how we have company cars, or most travel is paid for by the company, maybe a few personal bills are slipped in as well.
Step Two – If you have one of those enterprises where cash is used – stop pocketing the cash. As many businesses sell for a multiple of revenue you want to maximize revenue and make sure the sales and expenses are all real. I know its hard.
Step Three – Work with a small business CPA to recast the financials of the company going back 2 to 3 years on the accrual basis. Have the CPA as construct a year by year reconciliation of the recast financials with the tax filings.
Step Four – Work with a consultant for your exit. The job of the consultant on the exit phase is to supercharge your business and get it ready for sale. We will look at everything, people, process, management, marketing, competition, contracts, as well as forecasting for the business and the industry. Exit consultants also source potential buyers for the day the business is put on the market.
Step Five – think about your exit plan. Do you tell employees, keep it quiet, do you stay on for a transition period, will you take only cash or carry a note, do you accept a no compete or leave an industry? Most importantly, what will you do with the proceeds of the sale and your productive time that will be freed up? These choices need to be made by you and your family so all expectations can be aligned.
The objective is as simple as it may be hard to reach. When a buyer comes to look at your business you must ensure that everything they expect to see is ready for them to inspect and in good order. When a buyer encounters the unexpected – in their mind they develop imponderables. It is a fact of life and commerce that all imponderables are resolved to the negative. By being prepared and eliminating imponderables you can expect the higher range of sale prices.
Let us help you get your business ready for sale and you ready for the transition. Contact us today.