Preparing for Sale

Preparing to Sell Your Business

Can you increase the value of your business without increasing its’ profits?

Ask your accountant or financial professional and chances are they will draw a blank or answer “no”. You can and the concept of how you do it is astounding simple.

You increase the value of your business when you can take the appropriate steps to attract the appropriately qualified buyer.

To achieve the best end result, smart business owners approach the selling process with the shame planning and discipline that they use in the day to day operation of their business.

The following is an overview of the winning strategy you will need to follow to get the most out of your business sale.

These simple steps will increase the value of your business without increasing the bottom line

Plan Ahead

Smart business owners know that their business will either transfer or close. There is no alternative. Your company is a product, it will be treated as a prize to be won or as a piece of distressed merchandise to be acquired at a bargain basement price. How a business is treated can often be traced back to the timeliness and appropriateness of the owner’s decision to sell.

Take stock of your business

You must step back and take a long objective look at your business. Without objectivity, your business cannot be packaged to attract the most advantageous buyer and command the highest price.

Position your company to sell

A good definition of position is, “it’s not what you see that counts, but how you see it”. Buyers are looking for opportunity. Often this means stepping in to correct problems so that future profits can be gained. It is just as important to know what’s wrong with your company as it is to know what’s right.

Identify the right buyer

If your company could benefit from the strong marketing, then you should include in your potential buyer profile significant strength in that area. If your company lacks customer service, then someone with special skills in that area would be a good candidate. Remember, not all buyers will pay the same amount for your business.

Set realistic price and terms

This doesn’t mean you should accept one cent less than your company is worth, it does mean that unless you confidently defend the price and terms you set, you will lose the confidence of the buyer and your sale price will suffer.

Refine your organization

You should take steps to ensure that your business does not depend on you for its survival and success. The highest quality buyers are seeking a company to manage and don’t want to buy businesses when they see the current owner as indispensable.

Prepare your financial records

Comprehensive professionally recasted financial records are a must if you want to attract buyers willing to pay a premium for your business. Well-maintained records present you as a savvy owner and your business as professionally operated. Solid financial records greatly reduce the buyer’s perception of risk.

Review your lease

Lease issues and landlords can represent one of the biggest “deal killers”. Your lease provides you with a “license” to operate a business in a particular location, Without a lease, your business may be of no value to a buyer. Take the time to review your lease. It should provide for assignment and should be valid for a minimum of three years. If it’s not, renegotiate it before you start the sales process.

Obtain a third-party valuation

One of the most valuable tools at your disposal is a credible, third-party business valuation that supports your asking price. Buyers are more likely to pay top dollar for a business when documented evidence can be provided that supports the price they are willing to pay. Most non-owner sources of financing are insisting on a business valuation before they will even consider funding.

Prepare a business profile

You must provide information beyond the financial statements. Buying a business isn’t just a simple mathematical exercise involving the “numbers”. Smart buyers want more. They want customer concentrations, industry outlook, marketplace forecast, future influences from technology, industry margin comparisons, operating ratios analysis, the stability of tenancy and much more. A comprehensive business profile that includes this type of information will greatly enhance your business’s prospects of selling.

Valued Representation

Selling a business isn’t a “do it yourself” project. You should assemble your team early on. You will need the marketplace, legal and tax assistance. This typically means a team comprised of your business intermediary, attorney and tax accountant. Valued Representation through VR provides you with the resources and experience to present your business in its’ most favorable light.

Keep-in-mind that anything that increases sales also increases profits and the all-important cash flow!

Make it easy on the buyer to make a positive decision by making certain your business shows like a winner.

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Mergers & Acquisitions