Selling your business? Triple its value with these vital steps
If you want to get the most for your private business when it comes time to sell, you must put a plan into play three to five years in advance. Your plan should include paying attention to the bottom line, building infrastructure, and assembling the right transaction advisors. If you desire the maximum purchase price for your business, follow these vital steps:
Vital Step #1:
Pay attention to the bottom line. Most small and family-owned businesses are tax-driven. They are oriented toward not paying a lot of taxes. But if you want to get the most money when selling your company, you have to actually show a bottom line; you must become financially driven. To do so, you need a strategic business plan with a goal of increasing income. Consider ways to grow your business to gain additional income, thus making it more attractive to a buyer. Hire a marketing consultant to develop a marketing plan that will give your business some pizzazz. Growth could be the result of anything from adding more or new product lines to opening new branches. Focus on differentiation and quality.
Vital Step #2: Build infrastructure.
If you don't have a family member or valued employee to whom to leave or sell your business, you have to build infrastructure. Carefully select the person or people who can run your business after your departure. Have employment agreements, stock options and/or restricted stock agreements in place to help keep the new management there. Accounting systems are another way to build infrastructure. Is it time to upgrade your system, perhaps making it Web-based to create more efficiency? Are your policies and procedures well documented? Buyers will be reluctant to bid for your business if they feel they have to spend a fortune to build infrastructure, so build it now—it's cheaper in the long run and will add tremendous value.
Vital Step #3: Assemble the right transaction advisors.
When it's finally time to sell your business, you need to assemble the right team. You need an investment banker who is 'on the sell side' and who specializes in your kind of business. He or she will have invaluable contacts, help you put a value to your business, find buyers and help you structure the deal. You'll also want to consult with your attorney. The attorney can draft minutes, assist with documentation, formalize leases, implement agreements and make certain everything is done to the letter of the law. He or she will ensure that your lease is assignable to a new owner and that your firm s retirement and profit-sharing plans are in place to protect your employees and motivate them to stay. And don't overlook your own contacts. Look at people who have been active in your market or area. They may want to buy your business. Your friends who have sold their business may refer you to their own valuable contacts. You might even ask your competitors who they worked with to sell their business. Finally, allow your CPA to quarterback your team of advisors. He or she will be able to help you add great value to your business with, ideally, three years of audited financial statements. Your CPA can also recommend a great investment banker, and then work with and coordinate efforts with your banker, attorney and other advisors.
If you go through this process properly, at the end of the three to five years, you will have maximized the financial value of your business and have all the funds you need for your comfortable retirement.