Smart business owners plan their Exit Strategy.
How can I maximize the value of my business? As a California Business Broker, I am asked this question frequently. In this section I will discuss steps and strategies that a business owner can employ when preparing to sell a business. The key is preparation - the better prepared an exit strategy is, the higher the selling price it will command and the more likely it will sell. A few minor enhancements can dramatically increase the marketability of your business.
Many business owners, when selling a home, paint the exterior, landscape the yard and upgrade the interior. Why? Because it will sell faster and command a higher price. Yet, many business owners, when selling their business, simply decide to sell one day and put it on the market. In reality, an exit strategy for a business could reap huge financial rewards for the owner when the business is sold.
Why don't many business owners do more to prepare their business? One reason is that they are not sure what to do. This is one reason I am writing this section and why I do advance planning for business owners. The other reason is that the number one reason business owners sell is because they are burnt out. it is difficult to take the time and effort to prepare everything when all you want to do is walk away.
If you are a business owner and are reading this because you are considering selling your business, remember, upwards of 60% of businesses do not sell and selling a business, on average, takes 6-18 months. Your goal is to get a good price, but also to make sure your business is one that sells and sells quickly. Any work that is put in will pay off.
Maximize Discretionary Earnings The period of time just before a business is put on the market should be a time when everything is done to show the highest earnings possible. Every dollar of DE could mean 2-4 dollars in selling price. If you grow your sales just $25,000 that means your business could reap your an extra $100,000. I have your attention now, right? Also every effort should be made to show growth. Growing businesses sell for a premium.
Timing Timing when to sell can be difficult. It means taking a hard look at your operation. Have sales peaked? Is your business profitable? Is your business stable and / or growing? Are the proper systems in place for your business to operate on a day to day basis? If these answers are yes then it is a good time to sell. If not, it may be advisable to wait a short time. Additionally, if there are any trends that are affecting the industry that you are in then it may be a good idea to wait as well. The best time to sell your business is when you are having your best year ever.
Even if your sales are not peaking or even if your business is struggling, keep reading. The advice here will still benefit you.
Exit Strategy and Financial Documents
Your financial documents are the proof and record of your earnings. In the absence of these records, the buyer is going to have to "take your word for it." Read how to prepare your books before you sell your business.
Employees and Infrastructure
As a California Business Broker, I hear frequently, "do you have any tips for selling a business?" Here I will share with you some great advice that may help you position your business so that it will be appealing to a buyer. On this page I will focus on creating systems that will help you business to be marketable.
The valuations for selling a business focus almost solely on the strength of your earnings, BUT there are some additional things that an owner can do to make the process go smoother. Making your business look it's best will help when buyers start visiting.
Do's and Dont's
My work as a California Business Broker brings me into contact with business owners on a daily basis. Business owners are generally take charge type of people. Being such, many times they ask me, "What can I do to help sell my business?" What are some easy exit strategy items that I can do right away? In response I have developed a do's and don't list when you are selling.
Do you find this information helpful? If so, why not subscribe to my e-newsletter. Each month I email business owners with tips and advice relating to selling small and medium sized businesses.
If you are a business owner in the Southern California area and are planning on selling, I would be happy to work with you one on one to develop an exit strategy to increase the marketability of your business. I offer advance planning services, most times for no cost. My goal is to partner with business owners with the common goal being the successful sale of the business. I would much rather work with a business owner,wait, commit to an exit strategy, and move forward later then simply put it on the market and see what happens.
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