Statistically, the vast majority of owners of small and medium-sized enterprises admit that they have no succession plan in place. This fact points to a common assumption many business owners make. Unfortunately, this is far removed from reality. Even in the best of times, for the very best businesses, the success rate for selling your business is less than 3%. Bellow are factors to consider when preparing to sell your business.
Putting together a thorough, comprehensive exit plan entails paying attention to some critical areas of your business to attract the highest quality of potential buyers. For example, you must have fully-documented financials available that cover a minimum of five years, including the present year.
For savvy buyers, the reality of potential return on investment is what your company looks like on paper, and not what you as the seller think it is worth. While you will certainly want to engage the services of an experienced professional who is well-versed in all the nuances of proper valuation, you do need to understand at least some of the factors considered in an assessment.
--Potential buyers will focus on obvious things such as net income, revenue, and cash flow as primary measures
--Buyers may also consider what is known as the EBITDA, or "earnings before interest, taxes, depreciation, and amortization," a measure used to analyze and compare profitability between companies.
--In addition to a thorough financial review, a buyer who is looking to invest in a business will consider other things before making an offer. A prospect will probably want to know details such as how many service calls you average per day and the value of those calls.
Renovation of the business premises
Your physical location speaks volumes to a potential buyer, so don't neglect it. Something as simple and inexpensive as tidying up the landscaping, throwing a fresh coat of paint on the exterior, or ensuring that the dumpsters are emptied and clean, can make a big difference when you are courting buyers.
Get your employees in the habit of keeping their company vehicles clean, their workspaces orderly, and their personal appearances neat and professional. First impressions count and never more so than when you are trying to find the perfect buyer for your company inventory.
Once you've made the determination to leave your business, it's easy to get caught up in the sales process and forget you still have customers of whom you need to take care. Don't allow yourself to get distracted from the everyday running of the business. Allow your advisors and transition team to handle the exit details while you do everything you can to increase your bottom line and make the company run more efficiently.
A prospective buyer will be looking beyond the books for both tangible and intangible factors that make your business more likely to produce a quick return on investment. Planning ahead will ensure that you have done everything possible to make your business an attractive option for the prospective buyer.
Selling your business is one of the most important phases of your life. Planning and preparation ensure that you will be able to get out of your business the money you need in order to create the future you desire. Educating yourself now on the perfect exit strategy and implementing it in phases is the best way to avoid making bad decisions that will impact your retirement.