How many times have you heard the well worn cliche about selling your home, location, location, location. Well a business has its mantra too…it’s, preparation, preparation, preparation. Now, it’s not that location isn’t important to a business, but the planning and preparation are far more essential to the successful sale of a business. Waiting till the last moment before even beginning to think about preparing to sell your business is not only shortsighted, but possibly fatal to your financial health.
The more effort you spend preparing your company and its management for the sale of the business, the more attractive your business becomes to a prospective buyer. Start thinking about the process at least two to three years before the transition event. With a proper amount of lead time you can pace yourself, allow enough time to consider all factors that have to be addressed and develop a solid exit plan to cover all contingencies…it will reap all the desired benefits.
However, selling your business is no stroll in the park, it is going to change your life and the lives of all those around you. You’ll need the right motivation and mindset for selling your business…furthermore, your business is part of you and all that implies. Selling a business is a frustrating and often nerve wracking experience and above all it’s an emotional experience like no other. Nevertheless, once all the smoke clears and you’ve closed the sale, it’s not what you sell your business for that counts, it’s how much you keep. If you receive a just and fair sale price, are able to minimize personal and capital gains taxes you hopefully should be able to finance your retirement for years to come.
However, no buyer will acquire your your business if it is not attractive. Just because your business is making profits, doesn’t mean that it is attractive to a prospective buyer. There are numerous factors to consider which should be viewed from a buyers perspective, such as:
- What is your profit margin compared to industry margins?
- Do you have patents, trade secrets and /or competitive advantages?
- What is your customer retention rate?
- Do you have repeat business and/or long term contracts?
- Do you have a skilled and loyal workforce?
- Do you have exclusive distributor contracts?
- What are your growth plans and/or is your business scalable?
These are just a small number of salient attributes that contribute towards collective attractiveness. By executing a formalized exit (transition) plan you will be able to streamline the business and manage it with the endgame in mind…the sale of your business and maximizing your equity.