Our family grew up in standardbred horse racing. We spent many a day primping and polishing the finest young stock to walk out onto the showroom floor at the select yearling sale.
We wouldn’t have considered selling a yearling that wasn’t at its absolute finest that day.
Grooming your business for sale could yield equally strong results.
Not only will grooming your business likely improve pricing and reduce the time to complete a transaction, but the steps are, in fact, good business practice.
You never know when the opportunity for a sale might arise, either because of health or injury, or because an offer comes along that is too good to pass.
Do you know what your business might be worth? It may prove beneficial to discover what multiples comparable businesses have recently sold for.
Today’s combination of low interest rates, capital market liquidity, and significant pools of private equity and debt are driving merger and acquisition activity.
This can be a great opportunity for business owners.
Begin the process now I can’t think of any reason not to make your business the best it can be, at all times, so why not get started?
• Prepare a business plan, including a threeyear projection. The more a buyer can count on expected future revenue, such as a contract backlog, the better.
• Prepare a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis.
• Construct a brief summary of your industry, key success factors, and future growth prospects.
• Know your competitors.
• Identify expenditures that a buyer will likely not incur, so that the profitability is clear.
• Have your financial statements appropriately prepared.
The next step is to evaluate second-tier management team members. Do they possess (or show potential to develop) the skills to step up after the sale?
For key members of management, formalize relationships through employment contracts.
It is also necessary to identify key employees to the business and attempt to predict their reaction to a potential sale of the business.
• Ensure contracts with third parties are in place and current.
• Protect intellectual property.
• Ensure premises are clean, neat, and well organized.
• Organize inventory and sell obsolete or slow-moving items.
• Ensure equipment is well maintained and dispose of redundant/obsolete items.
• Organize contracts and records for easy access.
• Document key processes, procedures, and methodologies.
With regard to corporate reputation:
• Document public relations initiatives.
• Gather customer testimonials.
• Summarize any litigation and show how you are managing risks.
• Ensure compliance with all regulatory requirements, including environmental.
• Have documentation of regulatory compliance available.
Consider your business through the eyes of a prospective purchaser. While the decision to sell your business will be driven by your personal and financial objectives, it’s just plain logical to recognize that life and business are unpredictable, and events and opportunities may mean you find yourself pursuing a sale earlier than you had planned.
The investment you make in planning will be worthwhile and give you the peace of mind of knowing you are able to respond to events quickly and from a position of strength.
