Important Exit Planning Steps When Selling a Business
Entrepreneurs love the challenge and reward of building a successful business. The moment the company starts to turn a healthy profit, the countless days working long hours and giving up weekends and holidays become worthwhile. But during this process, business owners often fail to consider their exit strategy and using a business intermediary can provide much needed help.
No matter how much you enjoy running your business, there will likely come a day when you need to get out. Whether it is a health condition, retirement, moving to be closer to a family member, or any other reason, there might be a time in the future when you are no longer able to continue operating your business.
To ensure you are ready for a successful business sale, there are some steps you should take ahead of time. Here are five of them:
Reduce your Role in the Business: As a business owner, you probably have multiple roles in the company. Perhaps you are also tied strongly to its brand. This situation may be working well for you right now, but it will be highly problematic for a new owner. Prospective buyers need to be able to picture themselves smoothly and seamlessly assuming operations. For this to happen, you need to diminish your role and hand off more of your duties to trusted employees.
Automate your Business Processes: The more difficult it is to operate your business, the more limited your pool of prospective buyers will be. Most buyers are looking for a business they can plug right into and start making a decent profit with from day one. This is much easier when you have documented tasks, processes and procedures that make the business work. If you have not done so already, take steps to make your business processes clear and in writing, so the next owner can pick up where you leave off.
Get your Financial Statements in Order: Any serious buyer is going to want to see detailed financial reports before moving forward with a purchase. And the last thing you want to do is make it difficult for them to understand your financial picture. When that happens, it often raises a red flag in the minds of buyers. Get together with your accountant and bookkeeper and put together detailed reports that give prospective buyers an accurate financial picture.
Make Necessary Technological Upgrades: Are your computer, telecommunications, and other technological systems up-to-date? In other words, are you operating at optimal efficiency compared to other businesses in your industry? Your systems do not have to be brand new. Buyers will understand if they are a few years old. However, if you are still using legacy systems then might run into problems. Speak with your IT person about which systems need upgrades, and try to fit this into your budget.
Maximize Growth Opportunities: Buyers are most attracted to businesses that are profitable and growing. This means that in the past couple years, you are trending upward rather than downward. To put your business in this position, take a look at ways to grow that you may not have considered in the past. For example, is your website up-to-date and mobile-friendly? Do you have an active social media presence? Are you attracting the number of leads you could through online and mobile channels? Evaluate your marketing efforts and identify any new strategies that could be employed.
Selling a business is a major decision, and one that require a lot of pre-planning. If you are thinking of selling in the next couple of years, the best time to start planning is now. Take the aforementioned exit planning steps, and speak with a business intermediary about other ways to make your business attractive to targeted prospects. A reputable business broker is able to leverage their extensive experience to help you properly plan for the future sale of your business.