Preparing your business for a successful sale is an essential step towards achieving your business exit goals. The few years leading up to a sale are critical in determining your eventual valuation and salability. My podcast partner, Jessica Fialkovich, CEO of the company Exit Factor and author of the book “Getting the Most for Selling Your Business” is an “Exit Planning” expert. I spoke with her recently, and she provided Transworld with this invaluable list of eight exit-planning tips.
1. Reduce Owner Involvement Many potential buyers are looking for a turn-key operation that can run smoothly without significant owner involvement, so it is essential to create a business that has processes and systems that can operate seamlessly without your constant input.
2. Achieve Consistent Profitability for at Least Three Years Buyers are looking for a business that can provide a reliable return on investment, so it is essential to demonstrate a consistent track record of profitability. By demonstrating a history of consistent profitability, you can increase the value of your business and make the purchase more bankable.
3. Eliminating Deal Killers: Legal, Tax, and Regulation Issues This means resolving any legal, tax, or regulatory issues that could prevent the sale from going through. Some common issues to address include outstanding lawsuits or liens, unpaid taxes or fines, and regulatory compliance issues.
4. Maintaining Clean Books and Records Every buyer and bank will want to review financial statements, tax returns, and other documentation to evaluate the financial health of the business, so it is essential to maintain accurate and up-to-date records. This means using a professional accounting software, computer inventory and invoicing systems, and ensuring that all financial data is accurate and complete.
5. Maximizing the Reputation of the Business Your business must have a positive reputation with customers, employees, vendors, and other stakeholders online and in person. This means working to build a strong brand, providing excellent customer service, and maintaining positive relationships. Clean up any issues that are outstanding now.
6. Grow The Business Your business will be valued based on future earnings. Businesses that have a history of growth will command a higher price. Implement strategies that can increase revenue and profitability, such as expanding product lines, entering new markets, and investing in marketing/advertising.
7. Document Processes and Systems A documented plan that outlines the responsibilities of the new owner, roles of existing employees, and any other important details is invaluable to the sale process. If a new owner can take over without disruption, it will allow buyers feel more comfortable and confident in the future success of the company.
8. Have a Diverse Customer Base. Having one customer that represents more than 10-15% of your gross sales could be a major issue. Work to expand your customer base.
9. “Stage” the Business. Online and in-store representation of your company is critical. Buyers will picture themselves sitting in your chair, walking through your operation, and even using your bathroom facilities. If either are a mess, many buyers will move on. Clean and unclutter! Preparing your business for a successful sale is a long-term process that requires careful planning and execution. Using a company like Exit Factor (exitfactor.com) can help get it ready for companies like Transworld Business Advisors to sell it!
TRANSWORLD BUSINESS ADVISORS
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