Leading financial researchers report that 75 percent of U.S. businesses do not sell. It dismays me to see entrepreneurs receiving so little in return for all their years of hard work. Or having to shut their doors with no buyers in sight. It’s even more disappointing since businesses can easily take steps to achieve maximum perceived value for a potential buyer. It just takes a little planning, know-how, and application to take a $100,000 a year profit-generating business and sell it for $200,000 or more.
Maximize Your Exit Strategy Now & Sell Your Business for Maximum Profit
When it’s time to sell your business, you must ask an all-important question: “What am I doing to increase the asset value of my business?” To prepare for selling your business, start with these exit strategy pointers:
Quantify Your Business Value
No one will price your business without knowing its exact worth. You need to identify which assets to include or exclude from the sale (note that this is much more difficult if your business is a sole proprietorship rather than a corporation). You also have to list your risks. Then you’ll have a better idea of the value of your business. It may not be worth as much as you’d like, but now you have a realistic idea about price expectations and goals to meet with your exit strategy.
Eliminate Worthless Inventory and Debtors
No one wants a business with out-of-date stock. So, if you want to sell your business, get rid of it.
Same with long-term non-payers. Make them an offer they can’t refuse or write them off. Both outdated inventory and debtors weigh down a sale.
Straighten Financial Records
Buyers want the facts, and they will be asking scores of financial questions. You must be prepared to answer everything and anything about the reporting end of your business.
This includes balance sheets, assets and liabilities and the taxation position. They all need to be clean and ready to view when you’re selling your business.
Audit Your Books
More specifically, before you sell your business, your business records must be up-to-date, accurate, and well organized. Engage a bookkeeper to assist with updating your records if you don’t have time. The job will be much easier if your records are computerized. Your accountant will need to audit your records to include extensive verification, confirmation, and performance. An evaluation of internal controls can be a considerable help to both you and the buyers.
Strengthen Legal and Contractual Affairs
Buyers will also have many legal questions when you sell your business. What is the ownership and structure of your business? Have you been compliant with the regulations for your particular business? What contracts do you have with customers and vendors? What is their status? What is outstanding?
Install and Improve Systems
Owners are the main source for daily operations. Unfortunately, such details are often only stored in their brains. Department manuals are a big plus when you’re trying to sell your business. These how-tos do not have to be long and complicated.
You need just enough to cover the basics and relieve your potential buyers’ anxieties about your absence.
Prepare Your Management Team
Even better than the written manuals is having someone in place who can personally answer questions. In larger firms, the buyer wants to know what manager(s) will help with the transition. Who will be the knowledge bank? How long will this source(s) be staying?
Take Steps Now for a Successful Sale Later
Selling your business is one of the most critical times in your life. It’s essential to be prepared and ready for any prospect who may come through your door.
The seven steps described above are just the beginning. They’re a start on the right path toward higher profits. If you want to sell your business for maximum profit, then you need to start planning your exit strategy now.