How Do I Know When To Sell My Business?
The majority of business owners are so concerned with day-to-day operations that they do not give adequate thought to a potential sale of their company. There are several aspects to consider when selling a business, and appropriate planning may optimize the owner’s profit.
In a perfect environment, the greatest moment to sell a firm is when it is functioning well and future estimates are even more optimistic, the national economy is robust, and Wall Street investors are paying close attention to the industry. However, regardless of the status of the economy or the sector, there are steps business owners can do to make their company more marketable and appealing to potential buyers.
To increase market value, consider the following:
- Document and standardize all corporate procedures
- Eliminating obligations or liens and resolving any pending lawsuits
- Examine the transferability of leases, sales, and supplier agreements
- Maintain the company’s equipment to guarantee its optimal condition
- Protect important personnel with employment agreements
- Eliminate from the payroll nonperforming or noncontributing staff.
- Create a management team capable of operating without the current owner
- Reduce dependence on one or two large clients for the majority of sales.
- Enhance the physical characteristics of the company facility
- Have three years of clear, verifiable financial statements
Take the following measures to increase cash flow:
- Reduce overstock inventory
- Collect any overdue receivables.
- Re-negotiate advantageous supply agreements
- Reduce the number of individual adjustments on Income Statements.
- Ensure that financial controls are in place.
Owners should be conscious that running a business and preparing it for sale inevitably creates a tension. Numerous enterprises are operated with the aim of minimizing tax obligations. Sadly, the same techniques and accounting practices that minimize taxes also reduce a company’s value. Plans for the sale of a firm should ideally be established three to five years before the planned sale. This will provide sufficient time to implement improvements and establish a history of maximizing profitability.
In addition to establishing a future goal date to sell their firm, business owners should consider what they hope to gain from the sale. Do they just wish to fund their retirement? Is it crucial that their son or daughter stays with the company? Can they obtain tax advantages by financing a portion of the purchase price? Do they want to assure that the new owner will maintain the same level of customer service? Make a list of goals and consult with business consultants to avoid unpleasant surprises throughout the business selling process.
Once the choice to sell a firm has been taken, the owner must be mindful of the requirement for secrecy. Leaks regarding the sale of a firm can provoke panic and dread among the employees, suppliers, landlords, and financial institutions. Additionally, great care must be taken to ensure that rivals and clients are unaware of the impending business sale. Competitors may undermine a company by disclosing sensitive information to staff and consumers. Key workers may seek alternative job opportunities. Customers may seek alternate sources for the product or service if they are concerned about how the firm will operate under new management. If any of the following were to occur, the value of a firm may be drastically reduced. Working with a seasoned Merger and Acquisition Advisor or Business Intermediary reduces risk. The business’s name and any other details should not be published until it has been confirmed that a possible buyer possesses the necessary skills, experiences, financial resources, and management qualities to operate the business under consideration. In addition, all prospective purchasers should be asked to sign non-disclosure agreements saying that they would keep all revealed information secret.
It should now be obvious that early planning for the sale of a business will generate the most value and will likely accelerate the sale. Focus on increasing market value and cash flow, carefully arrange the conditions of the firm’s sale, seek the assistance of business specialists, and retain confidentiality.
Our best advice? Don’t waste another day and talk to a Sunbelt South Florida broker today!
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing
Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222.