If you are determined to get the greatest price for your company when it is sold, Truforte Business Group, Florida’s trusted Business Broker, offers up these 5 tips to keep in mind when selling your business. Having sold hundreds of businesses, with decades of experience Truforte recognizes that it is critical to prepare a business for a sale. The following are the five most important parts of the planning process.
1. Stop running the company
Many purchasers have been trained to believe that a firm cannot function without its original owner. Many potential buyers are scared that the firm would underperform if the existing owner departs, and this worry stops many companies from ever being sold.
When preparing your firm for sale, it is a good idea to cut down on the amount of time you spend operating it on a daily basis. Because most small companies are based on the owner/manager, potential purchasers believe the firm would suffer if it changes hands. If you can demonstrate that the firm can run financially without you, you have a valuable asset that should sell for a premium.
2. Appoint Managers
Buyers like stability and abhor risk. Putting in strong management is one method to reduce the perceived risk of purchasing your organization. If you can recruit management and establish a chain of command that separates you from day-to-day operations while still ensuring the firm functions smoothly, you have removed a huge stumbling hurdle for many purchasers.
A prosperous firm with well-trained management who know the business well and are eager to run it from the start is an appealing prospect that many purchasers will not pass up.
3. Establish Business Systems
During the planning phase, seek to have all of your business processes documented and operational in a specified system. All business activities should be well-defined, and each person in your organization should have a distinct function with a well-defined job description.
Use the planning stage to implement systems that explain and record how each process in your organization operates, and ensure that all workers understand how these systems function.
Building in processes is vital because it increases buyer trust, which leads to higher bids. Many buyers value a firm that runs smoothly and effectively, with well-defined procedures and systems, since it decreases the amount of time and money they have to spend learning and repairing unproductive practices.
4. Legal Concerns
It is critical to resolve any legal conflicts or concerns that may hinder the sale of your firm since any serious buyer will undertake some type of due diligence if they are interested in acquiring your business.
Many transactions have fallen through owing to legal concerns or disagreements that the seller neglected to resolve or disclose. You have laid the ground for a successful sale if you are able to resolve these concerns prior to discussions and due diligence.
Lease agreements on land and equipment, pending payments or court settlements, and other possible liabilities should be addressed prior to the negotiating process since these concerns have a history of collapsing transactions.
It’s also a good idea to formalize any verbal agreements you have with essential suppliers and customers. Prospective purchasers want to know that all major components of the firm are legally bound and enforceable.
5. General maintenance
It is critical to maintain your facilities and ensure that all equipment and goods are up to date, that your office appears nice and professional, and that any unsold or out-of-date merchandise is moved on. First impressions of your company are critical, so create a good one.
You should also utilize this time to start checking through your company’s financials. Many small firms are structured to reduce taxes, however, this technique of accounting results in lower values since many offers are made by applying a multiple to annual earnings. If you can alter your accounting processes or at least include a framework that displays the company’s genuine profitability, you will save a lot of time disputing about the firm’s valuation.
It is a good idea to examine your creditors’ situations in order to lessen the quantity of bad debt on your books. Buyers are wary of acquiring firms where there seems to be a significant degree of the bad debt or when consumers wait too long to pay obligations. During the planning stage, you should try to limit the amount of bad debt and maybe reorganize how certain accounts are paid.
If you are committed to getting the greatest price for your company, it is critical that you put in the time and effort to ready it for sale. Otherwise, you risk losing money. A badly prepared company is seldom sold, therefore don’t cut costs at this time.