Selling Your Business?
7 Key Steps to Position High Value for Your Business
You've put your blood, sweat and tears into building your business, and now it's time to sell the business. Selling a business requires a fair amount of legwork, including financial analysis, market research and sales expertise. The more you prepare, the more successful the outcome is likely to be.Selling a business is both art and science, and in no other area is this more evident than the valuation. If you price is too high, you’ll scare buyers away, if it’s too low, you’ll lose out. Hiring an experienced appraiser helps assure that your business is priced accurately. Consider these 7practical steps for making the process go smoothly.
1. Create a Written Growth Plan – Potential buyers want to see what your business can do for them. Formalizing a growth plan that includes products, markets, margins, expansion, intellectual property, etc. all help potential buyers visualize where the company could go in the future. Documenting this plan can also help with setting the business sales price.
2. Management Depth – Buyers also look at the quality of management staff and employees when considering purchasing a business. Will the current management and employees stay with the new owner? If so, employment contracts should be reviewed to ensure a smooth transition to a new owner. A potential buyer will want to ensure that a mass staff exodus doesn’t occur when he/she takes over.
3. Proprietary Products/Technology and Diversity - Potential buyers may put a higher value on a company if they can visualize how new proprietary technology or products and a registered trademark can be integrated into the business. By always looking for new ways to innovate and create quality and diverse products or services the value of the organization increases.
4. Clean up the Business – Companies should take a hard look at all areas of the business such as manufacturing, human resources, IT, sales and marketing, and management structure and clean them up as much as possible. Streamline processes and procedures that can be streamlined and document everything. A well run and tightly managed organization is much easier to sell.
5. Customer Base – A wide customer base makes acquisition easier. If too much business is concentrated with just a few customers, selling may be difficult as any future customer dissatisfaction can severely impact the business’s profitability. Every attempt to diversify the customer base should be a primary action item for every business looking to sell.
5. Penetration of Barriers to Entry – Any business owning hard to get licenses, permits or regulatory approvals can be extremely valuable to the right buyer. Government market is very hard to break into. If the business has already broken through those barriers, the business becomes much more marketable.
7. Proper Use of Professionals – Complete, reviewed and audited financials by a licensed CPA provide any potential buyer with a required level of trust in the company’s financial position. Use of a qualified outside attorney for day-to-day operations as well as during the sales process itself helps reduce the buyer’s perception of risk. Business referrals, industry recommendations as well as positive exposure within the industry help to obtain the maximum value for the business.
Experts suggest that business owners should get organized at least one year before they start, if possible, to think about selling. We hope you find this information helpful and would be happy to discuss any of the above at your convenience.
Robert O. Sailer
Pacific NorthWest Law Group
Telephone: (425-867-0512) www.pnwlg.com