getting your business ready to sellGetting Your Business Ready to Sell

Getting your business ready to sell takes time. It’s a fact that every business owner will eventually exit their business for one reason or another, so everyone should be considering their inevitable exit in advance and what it takes to sell their business for top dollar.

There will come a time when you know you’re ready to sell, and the sooner you get started in the planning process, not only will it increase your selling price, but you’ll have more options to plan for your future and the future of your business. Ideally, business owners should plan a few years in advance, which will give them ample time to increase their business’ health and position it for a sale with a substantially higher value.

Additionally, it allows time to introduce sellers to strategic partners to help them defer or reduce the taxes that they will be paying to Uncle Sam upon their sale.

Some of the top signs that you’ve built a business that’s “buyer ready”:

  • You’re ready to exit and know that the business is in the best shape it’s ever been in
  • It’s a profitable business with increasing revenue and profit trend that’s also paying you a suitable salary
  • You have recurring revenue streams (stable, predictable, contracts)
  • You have strong systems/management/team in place (not owner dependent)
  • There’s a substantial growth potential (“scalable”) for the new buyer – increasing revenue while avoiding substantial cost increases
  • You have good books and records (“clean” financials, procedures, strategic plan/manuals)
  • You have a diverse base of customers and vendors (not having “all your eggs in one basket”)

You can take our two-minute business value assessment here to see how your business measures up and learn how to improve upon your future valuation.

In addition to having an enterprise with the strong value drivers mentioned above, it’s ideal when the economy is solid which makes for a very good “deal environment”. This is when the stars really align for an ideal seller exit. As of the date of this article, the timing is outstanding, as our economy continues to be very strong with low unemployment, inflation in check, and strong GDP growth.

Business pricing multiples are high, interest rates are historically low for buyers, lenders are willing to lend money, and buyers are stronger financially than they have been for years.

There has been “talk” over the last decade, causing many owner’s to panic and put their businesses prematurely on the market since they claim that there will be a “deal stampede”, “business sales flood”, “seller tsunami”… as aging boomers retire, increasing the supply of available businesses, increasing buyer opportunity and lowering seller pricing multiples, and thus the price of their businesses the longer sellers wait to exit.

The great recession delayed this flood of businesses placed on the market. We also know from experience that valuation multiples drop during a recession. I don’t have a crystal ball to determine if/when it will happen, but history tells us that economic cycles are inevitable.

In addition to the bullet points above, as you consider to plan your exit, you may want to start the process by hiring a business valuation expert to help you determine the most probable selling price of your business as it stands today and determine what you will net from the sale and how much you’ll need to increase its value to achieve your financial objectives.

We can support you in these efforts and introduce you to strategic partners that can help you with the other pieces of the puzzle; such as the legal, financial, and tax planning ramifications.

You can reach me personally at:

(720) 436-1472

wayne@wrightbusinessadvisors.com

wrightbusinessadvisors.com