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READY TO SELL YOUR BUSINESS
Will Your Business Be Ready to Sell?
First in a series of (at least) Two Articles
OK … you read last month’s article … SO, YOU THINK YOU’RE READY TO SELL YOUR BUSINESS.
(If not or need a refresher click on the above link.)
There are three critical issues to consider in reaching a decision to sell your life’s work:
1. Why do you want to sell?
2. Are you financially prepared to sell?
3. Have you determined your emotional readiness to sell?
In this article, we’ll proceed on the basis that you have satisfactorily dealt with each of the above and are ready to move forward with the sale of your business. But before you take that step, there are 6 mindset issues you’ll need to come to grips with.
- Realistic Expectations
- Business Value
- You’re Too Busy to Sell Your Business
- Curb Appeal
- Get Your House in Order
- Potential Buyers
The value of your company is “in the eyes of the beholder”. That means what a qualified buyer is willing to pay, not what you would like to walk away with from the closing table. Please … don’t fall into the trap and start your sales-price thinking based on your perceived retirement plan needs. Your realistic price is one that is market-driven … not your desired life-style in your golden years.
The beginning of your sale process is an objective third-party valuation by a professional valuation expert to reinforce your realistic expectations. Based on the valuation, your asking price will reflect the optimum sale price that the market is likely to bear.
You’re Too Busy to Sell Your Business
You already have a full-time job running the very business you seek to sell. “Stick with the knitting” to maintain/enhance its value. That points to the need for expert advice and execution by a proven advisory and business broker resource.
A competent business advisory/broker resource will help you sell your business today if that is your goal. Moreover, employing its advisory services, a full-service resource will work with you to groom your business for future maximum curb appeal and peak sales value. And at the forefront, a competent resource will not offer a one-size-fits-all formulaic approach … your company is unique and advisory services must be tailored accordingly.
It’s more than just the numbers. You must project your company image as a marketable package. If you haven’t done so recently, go through a quick visual inventory of what your business looks like inside and out. Anything other than what you’d be proud to present to houseguests at your home needs immediate remedial attention.
How are you and your staff dressed … uniform shirts with company logos, professional business casual? Project an appearance that says to a potential buyer, “They take pride in this company, so it must be a good one.” While there’s more to curb appeal than just physical appearance, it’s a good place to start!
Get Your House in Order
To maximize your sale price, the business must have its “act together.” In large measure that means:
- Your business is not dependent upon you being present.
- Books and records must be accurate, verifiable and up-to-date.
- Human resources records verifying compliance are essential.
- Profitability is generally crucial to buyers to present a return on their investment.
- Written policies and procedures should be in place – legal, regulatory compliant and up-to-date.
- Systems should be employed that maximize the efficiency and effectiveness of the company.
There are two broad categories of business buyers … financial and strategic. Each has its own evaluation and decision-making criteria in selecting a candidate for purchase.
Financial Buyers are investors/operators interested in the profitability, cash flow and future exit opportunities of buying your business.
Strategic Buyers have a long-term business view of how your company may fit into their plans toward diversification, eliminating competition or enhancing its own shortfalls, e.g. technology, marketing or R&D.
Screening, vetting and selecting the right buyer prospects will make all the difference in the outcome of your sale.
Ability and Willingness of How to Pay is a key component in vetting potential buyers. That means access to financing … potentially including your willingness to finance some portion of the transaction.
Stay tuned for our next issue and profit from a Checklist for Success – a simple planning tool to better ensure your financial victory in the sale of your business.