Thinking About Selling Your Business?

Picture the Finish Line

Selling a business for top dollar is a dream for many business owners. Building and growing a business takes tremendous sacrifice so that one day the owner can enjoy the fruit of their labor and live a life of comfort and prosperity.

Have you put much thought into what your business would look like the day you retire? Thinking of selling your company someday? Do you plan to leave your legacy to a family member? It all starts with a well-planned and executed exit strategy.

Your objective when selling is to get maximum value. This requires time, preparation, and a team of professionals. If selling your business is on the horizon, B2B CFO® suggests you begin with the end in mind and follow these key steps:

Define Goals and Prepare Your Exit Strategy

When considering the sale of a business, a business owner has a wide variety of transaction options (e.g., ESOPs, Financial Buyer, Strategic Buyer, or Family Member). A formal business exit plan puts the goals, priorities, and strategies in place—in writing—for a successful transition. Without a clearly defined and communicated plan, business owners are leaving their personal and financial future to chance. A strategized exit plan can help you maximize the value you get and successfully market your business to potential buyers or investors.

Time the Sale of Your Business

The value of your business is correlated to the market within which it operates—therefore, you should look to sell when market conditions are healthy. Selling in a down-turned economy is not always advisable. If you anticipate growth in the future, wait until the economy rebounds. Also, consider whether you are emotionally prepared to sell. Do you arrive at work each day excited to tackle new challenges, or are you feeling irritable and burned out by the business?

Determine What Your Business Is Worth

To find the value of your business, subtract liabilities from the assets. A business is generally worth a multiple of its profit. However, don’t just base your assessment on number crunching. Consider the value of your business based on its geographical location, customer base, and your industry. Business valuation requires a solid grasp of both how value has been created prior to the valuation date and how it will continue in the future. An expert in business valuations will help you gauge an accurate assessment.

Prepare Your Financials

If you’re considering selling your business, prospective buyers are looking for clear facts and financial records to prove whether it is a profitable investment. Some records to have on hand include: two years of profit and loss statements, a current balance sheet, cash flow statement, business tax returns, a copy of the current lease, insurance policies, and employee agreements, to name a few.

Create Maximum Value Pre-Sale

The number one reason deals get delayed or don’t happen is due to declining financial performance. The value of your business before and during the transition process is key to obtaining the profit you desire. It could take 12–24 months of preparation before putting your business on the market. To help improve the value of your business, consider strategies to build a diverse customer base, create recurring revenue streams, ensure consistent and healthy cash flow, demonstrate scalability, and show a strong competitive advantage. Analyze your processes and look for ways to increase operational efficiency, reduce expenses, and control inventory without affecting your operations. The goal is to ensure your business is attractive to a large pool of potential buyers.

Compile Due Diligence Information

When potential buyers evaluate a company, they expect records and facts to be properly organized and documented. The location of due diligence documents is commonly known as the data room.⁴ There are many aspects of selling a business to consider, such as legal, accounting, financial, operations, human resources, and much more. Providing business information in a logical, organized format not only helps build trust during the sale process but can also reduce the time it takes a potential buyer to complete their due diligence analysis. Ensure you have all critical documents and records in a framework that is easy to understand and reference.

Assemble a Qualified “Team”

Don’t go it alone. If you’ve determined that your business is ready for sale, save yourself time, money, and frustration by building a trusted team of advisors. These experts can help you strategize, overcome challenges, and secure the highest possible value—so you can focus on running your business in the interim. Research their qualifications, track record, and experience. In order to get the highest value and negotiate the selling process effectively and efficiently, it is imperative that you enlist qualified professionals you can trust with confidential information. Experts that can help during the transition include an accountant, CFO, tax expert, lawyer, business broker, business appraiser/valuation expert, and banker or other financier, if third-party funding is needed.

Business owners can take proactive steps today—no matter what stage the business is in—to create a valuable, sellable company. B2B CFO® can show you exactly what it takes to create a solid business that can thrive and sell for maximum value.

If you are ready to start planning your exit now, or would like to know more about what exit planning is all about, contact B2B CFO®. We have several resources that educate owners, assist in developing exit strategies, and ultimately guide the execution of those strategies.