Is Your Business Ready To Sell?Business Information For Sellers Sell a Business
Posted by Anthony Samples on
At some point, every privately held business will be sold, transferred to a relative, or closed. Some business owners operate their business without ever considering an exit plan. Then something unfortunate occurs and the business is not prepared to sell, but must be sold quickly – and usually at a huge discount.
Your business should be prepared to sell every day, that is, maintained at a level of maximum value.
What does “maximum value" mean? Your business, ready to sell at the highest price possible. What can you do to increase the value of your business?
- Sales must be increasing year over year. Businesses with a decrease in sales will most likely be sold at a discount.
- Are you the business? Are you the contact for the customers and suppliers? If you can’t leave the business for 30 days without fear of a disaster, you may have a business that's also a job. Put people in place who have the power to make decisions. The business must stand on it’s own. The more you are in the background with a strong team in place out front, the more attractive your business will be.
- Customer concentration: Do you have 1 customer that makes up a large part of your sales or maybe 2-3 customers that account for 50% or more? A buyer and the bank will find this a concern as the loss of 1 customer could impact the bottom line greatly.
- Clean books are a necessity. Eliminate unnecessary personal expenses. Businesses are valued by a multiple of the cash flow, seller’s discretionary earnings, or EBITDA. Some owners live out of their business, making it difficult to determine an accurate cash flow number.
- If you own a retail business or a business where your customers visit, how’s the curb appeal? When was the last time you remodeled? Buyers will be looking at your place of business with fresh eyes. Is the outside and inside up to date, modern, and appealing?
- If you have any excess equipment or inventory not necessary to the operation of the business, clear it out. A buyer will not pay full value, if any, for the excess. Sell it now while you can take a little more time and get a better price.
- Having too many relatives working in the business could be an issue. The buyer will have concerns ( i.e. ill they stay on after the sale? Will they be loyal to the new owner?).
So, how do you reach and maintain a level of operation for your business that will get you maximum value when it’s time to sell? Contact us for a free consultation. We can help.