Sometimes a business owner gets approached by another company looking to acquire them.
Warning! This is often not the best offer you will get. The acquiring company has a plan and is looking for a way to take over your market share, take over your systems, take over your people, or take over your product line all to make their company stronger. They have the plan and they have the leverage. Unless you must sell, don’t ever sell from this position. It will cost you more than you may know.
The best time to sell your company is when you are ready and can show your company in it’s best light. You’ll get a higher sales price and better agreements when you do. You never want to sell because your business is suffering or it is known that you have let it wind down over the past year as you decide to retire.
Here are a few tips to take care of before you are considering a sale.
1. Get Your Ducks In Line
This means that you’ve gotten your company in order. Pulled the skeletons out of the closet, and put a fresh coat of paint on it. Compare your business to selling a house. You do a little sprucing up to your company. Try to trim the overhead, renew customer contracts, renegotiate supplier agreements, manage inventory, make sure sales are increasing, and you have a great team that will be able to continue on after the sale. Take the time to get organized now. The better you run your company, the easier it will be to make it an attractive sale.
2. Clean Up Your Financials
Most buyers will want to review the past 3 years of your financials. This is the most uncomfortable part of selling your business. When the buyer starts digging through your financial records to see your income, its sources, your liabilities, the terms, your taxes and deductions, your salaries, and owner pay they are looking for problems and inconsistencies that tell a truthful story. Note that your books have 3 versions. The good, the bad, & the ugly. The good is what you want to show a buyer, banker, or investor. This showcases how great your company is doing. The bad is what you show to the IRS so that your company doesn’t pay more taxes than is necessary. The ugly is your general ledger where everything goes through and it shows how you really manage the financials of your company. All the numbers are accurate but showcased in a different light. When selling your company, they’ll dig deep into all 3 looking for a way to discount the sales price and avoid any risks. It’s best to be prepared in this area.
3. Plan For Your Sale
Planning in advance for the windfall of money that you will receive is one of the most important things on the Sale-Ready checklist. This usually involves preparation financially with a tax advisor to make sure you don’t get hit with a large tax bill, a lawyer for trust work and to make sure your back is protected in any future contract, and a financial advisor to help make sure the money lasts you a lifetime. Don’t forget about the planning you’ll need to make sure your business can get the maximum sales price. Finally, plan for your lifestyle after the sale. Are you going to start another business? Retire into the sunset? You’ll want to make sure you know what you want to do and if the proceeds will allow you to do it. All of these planning pieces require advanced work, so don’t wait.
Be prepared to sell your company. You’ll get a higher sales price and keep more of the proceeds if you are ready. Don’t react quickly to an offer that is handed to you by a competitor. When someone makes you an offer, it will always be in their favor. If you can get your business Sale-Ready before you want to sell it, you’ll be in control. You can have a great company now and a great asset that can be sold when you are ready.
Marcia Riner is a business growth strategist and the CEO of Trajectory Consulting. She helps service firm owners to optimize their business, drive growth, and to be in a great position to sell it someday. Together, she helps you create your roadmap to improve, scale, and maximize the value of your company.
Marcia hosts a weekly podcast with videos on YouTube @ www.Youtube.com/profitwithaplan and audio @ www.profitwithaplan.com
She runs a masterclass where she teaches business owners how to optimize and scale their business so that they can sell it someday @ www.Scale2Sell.biz
Want more great ideas, download Marcia’s newest eBook “Think Outside The Box – 10 Reasons To Get Your Business Sale-Ready Now” available on www.TrajectoryBiz.com