Preparing To Sell Your Business
The point at which you need to start preparing for the eventual selling of your company arrives long before you actually leave, similar to the way a pilot goes through a checklist before a flight takes off. It inevitably increases in value as your company expands, but in no way does that mean that you can automatically secure the full selling price. To get a more attractive deal from prospective business customers, there is still more you can do.
Many of the concerns that a buyer may have could be overcome well in advance by preparing ahead for the eventual sale. To get you started, here's a checklist.
1. Identify the correct possible purchasers
Planning for the company's eventual sale using the Sell My Business method starts with the selection of your ideal prospective buyer and any possible back-up buyers. Knowing who the future successor to your company should be will provide insight into what key concerns or obstacles at the time of sale you will face. Purchasers can include:
* Partners in Industry
* Primary staff
* Members of the Family
* A third party, including venture capitalists and other strategic investors
If you have established the optimal collection of potential customers, you must then determine how the company will usually pay for those buyers. Planning ahead will leave you with several more company sales options, as these tactics can not be applied efficiently at the finish line.
2. Put your house in order
It seems like the next important step to put a valuation on the company, but it can be a very tricky calculation to calculate that value. Don't think too much about the actual number; just make sure that you take the appropriate steps to plan the company for sale and earn the best possible price:
* Analyze audit and monitoring processes and accounting standards
* Structure plans for worker benefits to attract key staff
* Reexamine the composition of the pension plan and deferred compensation arrangements
In supporting a company valuation, getting a clean set of books is extremely critical. As the accounting methods that you currently have in place might be working at the moment, you can review your financial monitoring and audit processes, but bringing in an independent auditing company over the last couple of years would help you address any looming financial problems before buyers come in.
In addition, having one or two all-star employees who drive a large percentage of sales is not unusual for an organization. Providing good financial incentives for key employees to remain may mitigate future worries that the buyer might have about leaving those employees.
3. Scale your position back
A small business's success in the sell my business myself genre is generally related to its founder's motivation and determination. In other words, if you're the main value driver, and you're heading for the door, the value will decrease.
How the performance of the company is influenced by the involvement of the owner is necessary to calculate. The effect of the loss of key workers will be considered by every prospective buyer, and this includes you as an owner. Consider these measures to minimize your departure's impact:
* Grow and establish new key workers within the company
* Systematize critical operations to eliminate customer service issues
* Establish process guides and manuals for employees
* Build organizational teams to minimize the need for your feedback.
The more quickly you are replaced as an owner, the more profitable your company can become. Take the time to recognize all elements of the organization where your presence is relevant. Find ways to remove yourself from those conditions and use your main employees instead.
4. Consider the long-term requirements
It is important that you recognize the priorities of your personal retirement and expected retirement income. There is some sort of buy-sell scenario in mind for many business owners, but they seldom realize the full effect of the sale on their retirement. For instance, it may sound fantastic for some to sell your company and walk away with a $5 million check, but will it be enough money to produce the income required to sustain your current lifestyle?
Be sure to include assets with varying costs, growth expectations and tax implications while designing your personal strategy. Often, make sure the cost assumptions are reasonable and include important items the company used to offer, such as health insurance. Speak to a retirement specialist if you're uncertain.
Bottom line: A company owner should plan several years in advance for the selling of his or her firm. Do not leave it to chance by waiting until you are ready to sell, for you are already behind once you get to that point.