If you’ve spent decades, or perhaps even a lifetime, building a small business from the ground up, now might be a good time to sell. Valuations are up, and early signs suggest that trend won’t continue forever. You should begin preparing for a sale at least a couple of years before you hope to close a deal. So if you think you might be getting there, here’s what you need to do first.
Think it Over
Some owners sell solely because they’re unsure of the next step. Don’t make the mistake of not having a clear plan for after the sale—both for your business and for the rest of your life. You’ll have a lot more time, and with time comes the chance to ruminate. People who don’t have a clear plan are vulnerable to seller’s remorse.
Get Help From M&A Advisors
A business broker is not absolutely mandatory, but may be well worth the commission. This valuable advisor can vet buyers, find the right buyer, protect your business’s sensitive information, and answer buyer questions. This frees your time to concentrate on running your business, which can prevent the business from falling into disarray at a time when you need it to look its best.
Get Your Financials in Order
A diligent buyer is not going to rely on your promises and marketing efforts. They will want to see up to five years’ of profit and loss statements, tax returns, bank statements, leases and contracts, and customer data. They’ll also want credible—not rose-colored—forecasts. Make sure your paperwork is well-organized and believable. This is an area in which a skilled advisor can really help.
Transfer Assets You Don’t Intend to Sell
Once you’re ready for a sale, begin transferring assets to your name if they won’t be sold. This removes them from the expense column, and presents a buyer with a clear picture of cash flow potential.
Justify Your Asking Price
The value of your company has nothing to do with how much it means to you or how much work you’ve put into it. Value is in the eye of the beholder—and in how much potential that beholder sees in your company.
Certain scenarios may enable you to charge a premium. That includes a pipeline of business booked into the future, a 25% annual growth in sales trend, or demonstrable repeat business.
Look at your business with objective eyes. Do you have a clear strategy? Do things look bright for the future? Many companies make money in spite of their own bad practices. So if you can’t figure out how or why you’re making money, it’s time to get your house in order before you proceed to a sale.
Work Yourself Out of a Job
Everyone wants to feel valuable. But making your business dependent on you—particularly by micromanaging staff who can’t function without you—is a sure way to decrease the value of your business. A potential owner wants to know they’re taking charge of a well-run company with smooth operations. So work yourself out of a job.
About Sunbelt Atlanta
At Sunbelt Atlanta our team is made up of seasoned professionals with more than 60 years collective experience selling companies. Our backgrounds and industry experience are as varied as the companies we represent. Some come from main-street, some from wall-street. Collectively, we have closed more than 500 transactions and the companies we have sold range in size from $50,000 to $25,000,000 in transaction value and span all industries. One thing our professionals have in common is that they all have first-hand experience initiating, negotiating and managing the deal process. We can bring a main-street tenacity to a middle market transaction and middle-market finesse to a main-street transaction.