We all love our businesses. We worked hard to build them into something impressive and profitable. But sometimes even the most successful companies are difficult, maybe even impossible, to sell. Why? Aside from profitability, the number one reason people don’t buy is that the owner is too important to the success of the business. However, if you’ve completed Stages 1-5 of Small Business Success, chances are you now run a high-value organization that has all of its systems working. When your systems are working, your business becomes a reliable money-maker. And best of all, you no longer have to be there to run it. You’re not important to the success of the business. (Sounds harsh, but this is a good thing, trust me.) Your firm no longer requires personal passion and drive to continue to be profitable.Like it or not, being profitable is just one part of a business valuation. How owners structure their companies is at the heart of true market value.
A Buyer’s Checklist
What do investors want to buy? What makes some businesses more valuable than others? Investors aren’t solely focused on a company’s P&L statement. These buyers are also looking for top management teams, sustainable systems, good locations, excellent distribution chains, strong customer relationships, or valuable equipment. Many factors determine a company’s value.You should have a good management team, especially in HR, Sales, and Financials. Your books have to look good. Your P&L needs to be strong. And while it makes sense to finessing the appearance of a firm before selling, this isn’t the time to mess with the systems. If you’re systems aren’t strong, you’re not ready to sell a business. You may have real estate, equipment, or even a market share to sell, but without systems, you are not selling a business, just its parts.
Get a Professional Valuation
To ensure you know a good offer when you see it, invest in a professional valuation early on. A professional valuation should include an exhaustive analysis of your company, systems, assets, and the value of everything in inventory. This kind of valuation will also help you identify issues and fix them in ways that increase the selling price.
Financials Must be Pristine
Like it or not, your buyer is going to be looking at the books. Disorganized accounting is a red flag so if you’re thinking about selling, get all financial records into pristine shape now, before putting a business up for sale. It’s also wise to take steps to improve the company’s credit. Take stock of financial liabilities and look for ways to minimize or eliminate them. While credit issues may not have impacted the performance of a firm in the past, they will affect a buyer’s interest and the size of their offer.Once your financials are neat, easy to access, and well organized buyers can easily see your strong P&L, plentiful credit, and minimal liabilities. And that’s attractive to any buyer.
Don’t Rush it. This is a Big Deal
Selling your business is the very DEFINITION of a big deal. Take your time to get your company financials in shape, polish up the appearance, and make sure your strong systems keep working. At this point in the game, even small mistakes can cost you. Taking the time to get it right can increase your profits before you even start negotiations.Want to learn more? Feel free to email me at CarlGould@7StageAdvisors.comand let’s talk more about getting your business ready to sell.