Want to Exit Smoothly? Start Now
Too often, a Seller lets external forces push them out. Unfortunately, selling a business isn’t like selling a home; a buyer’s due diligence looks deeper than the fresh coat of paint and some curb appeal. Instead, the Seller needs to start their planning years in advance for an ideal outcome.
3 Years Out
Your Financials are Key
Clean up that Income Statement. No more meals on the company dime, no more taking home pens & paper– in fact, the more you pay in taxes, the better off you are (and you’ll more than make up those tax dollars when you sell).
What makes a business sale more than a liquidation is the goodwill, name, customer list, and intangible assets – and the only way to measure them is through demonstrable (taxable!) cash flow. Without those tax returns supporting your stated income, you won’t get full value for those intangible assets you’ve spent years creating.
2 Years Out
Reduce your Role
A Buyer wants more than the hard assets – they want the knowledge, tricks, & customers that you’ve developed over the years. The more you’re able to embed these into your business culture, the easier it will be to transfer the reins. Create Standard Operating Procedures, job descriptions for employees, and a well-defined management structure to handle the transition.
Keep Up Capital Investments
Don’t fall into the trap of pocketing cash and letting your PP&E depreciate. A Buyer will be unimpressed, and the price they’ll offer will reflect the time & hassle of having to make the improvements themselves.
Create Your Buyer List
You may already know your best Buyer. Has an employee expressed interest? What about a vendor or customer? Don’t rule out your direct competitors – while they can be tricky, the synergy of a strategic sale is a strong incentive.
Make Your Transition Team
Interview & choose an accountant, an attorney, and a business broker who have experience in mergers & acquisitions. Take the time to interview several professionals from each category; find people you work well with and trust.
Take Some Time
Taking a week off serves two purposes: first, it gives you a chance to reflect on what you’ll do after the sale, and second, it is a great ‘trial run’ for a sale. A week away from the phone helps you see what your business still needs to survive without you.
Make sure you give yourself time to build demonstrable value and ease the transition process, and you’ll reap the benefits of doing so long before you turn over the keys. Analyzing your business from a Buyer’s perspective helps you understand how to strengthen your bottom line and earn more from the sale.∞