It is rare when I get to work with a business owner well before they are ready to sell their business. Normally when I am approached, the business owner has already made the decision to sell and they are ready to sell now. However, in some instances I get calls well in advance of a sale where a business owner is actually being proactive and thinking about their succession from the business and how to get the value. This is where the most value can be added. What do you need to do in preparing for a business sale? What do the steps look like?
#1 You need to build a business to where it works without you. You need to have a way to exit yourself from the day-to-day operations. So many small and medium-sized businesses are dependent on a particular person to be involved, a particular skill, a particular customer list or a particular knowledge. A business that is going to be sold for a high value needs to be made big than any one person so that when that person leaves the business will still continue to be financially successful.
#2 You need to build the cash-flow and profitability. Most business valuations are based on cash-flow, profit and a multiplication thereof – so we want to get those numbers as high as possible and going up. Depending on the business, the assets may not matter much to the valuation. A small number of assets does not necessarily mean a small business sale price. Do you have a good customer list? Do you have a valuable brand? Do you have other things that a buyer would attach value to in continuing your business or attaching your business to their business? Figure out where the value is and maximize the cash-flow from it.
#3 Think about who your potential buyer is. Obviously, you can bring in a business broker or offer your business for sale to other people and you may get a great third party buyer, but your buyer may be hidden in sight. You may have an employee or somebody who you are familiar with, maybe a customer or a vendor who would be a natural buyer. You need to start thinking about who those buyers are going to be sooner, rather than later. The more you plan ahead, the more you start thinking about the sale as an event that is going to happen at some point in the future, the more you are really prepared, then the more value you are going to be able to extract.
What has been your thoughts on the business sale process? Have you been looking forward to a sale? What steps have you been taking to get your company ready for sale? Join us in the comments below.
Be proactive and plan ahead.
Plan and prepare to add value to your business.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Keigirl.
About the Author
Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment (www.rshawnmcbridelive.com), gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at email@example.com or (214) 418-0258.
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