So you have started to think about selling your business in the near future. Will you be ready? There are changes that you can make now that can make a big difference when the time comes to sell and help you avoid leaving money on the table. Begin by starting to plan 18-24 months before you begin looking for a buyer. Take a look at your business through the eyes of a buyer and ask yourself ‘What would I see as a positive about this business?’ ‘What would I see as a weakness about this business?’. We have included 7 small changes here for you to consider implementing:
- Understand your business’s financials. It goes without saying that buyers are going to be delving pretty deeply into your business’ finances. If you aren’t able to provide statements that are professionally prepared, this can be seen as a risk to buyers. If the buyer doesn’t feel that they can rely on the numbers, they most likely will either offer a lower purchase price or pull out of the transaction all together. You should be prepared to answer all questions and have at least 3 years of financial statements in perfect shape.
- Take a look at your customer concentration. Do you have too much concentration placed on a single customer? This can cause buyers to take pause and wonder what will happen if they lost that customer after the sale. It’s best to begin to look for ways that you can grow your other customers as well as gain new ones in order to reduce the concentration issue. Multiple sources of revenue can lead to a higher purchase price.
- Can your business survive without you? Many business owners become the main point of contact with customers as they grow their business over the years. Now is a good time to begin shifting those relationships to other members of your team. Otherwise buyers will have the concern that when you leave, clients may leave the company as well. In addition, you should have designated employees that can continue to drive the business forward and increase revenues after you have exited the business.
- In the time leading up to placing your business for sale, be sure to resolve any legal disputes that may be pending. Nothing raised red flags more for a buyer than finding out there is a legal case pending against you.
- Closely analyze the business practices that you are currently using and if you decide that it’s necessary, implement more efficient operating procedures before the sale. This could include reducing or adding employees, or investments in new technology or equipment. Taking these measures before a sale can result in a higher sell price.
- Create a master system of how you access, store, organize and update all of your systems. In most cases, this will be a collection of enterprise software or file folders with controls that have been put into place for who can access what. This system should become a part of your employee culture and be used on a daily basis. A prospective buyer will see that the knowledge needed to run your company does not lie with any one employee, but instead is contained in the systems of the company and can easily be maintained after a sale.
- Organize your legal paperwork and make sure that it is all in order and readily available as prospective buyers will request access to these documents. Review your permits, incorporation paper, leases, licensing agreements, vendor and customer contracts, etc. Ensure that they are current and in order.
Continue to keep your eye on the ball and run your business as if you are going to run it forever. Benchmark International can be your partner throughout this process and help free up time for you to continue focus on running your business operations while selling at the same time. With a team of specialists that arrange these types of deals every day, we can answer your questions and help you determine what is best for you, your business and your exit plan. A simple phone call or email to us can start the process today.