Plan Ahead to Sell Your Business

Selling your business can be a very emotional process.  Countless hours and tremendous effort go into building a business, then one day, it is time to sell.  It is easier for serial entrepreneurs to deal with closing day than it is for someone who has been in a business from start-up 25 years ago.  Being prepared to sell involves a fairly objective viewpoint along with a plan for the future. 

There is a great deal of advice coming from many directions once you begin to look into what is involved in the sale, and most likely, some conflicting advice to wade through.  Do you really need 3-5 years to plan your exit?  That depends on the state of your business right now.  If you are ready to let go, have clean, up-to-date books, systems and procedures in place and your business is making money, call up a Sunbelt broker and get the ball rolling with a confidential consultation and appraisal.

 If, on the other hand, your books are full of expenses not directly related to your business, or your books consist of a shoebox full of receipts, your systems and procedures aren’t solidly laid out and your business is not profitable, it would indeed be wise to spend a few years getting things in order.  There are many consultants who can help you with that.  Then, when everything is ship-shape, talk to a broker.

 Your reason for selling can be the primary driver for your timing for selling.  You may not be willing to invest 3-5 more years.  You may want to get out as soon as possible due to sudden health issues, boredom, stress, partnership disputes or family reasons.  In the case of a quick sale, a broker will do his or her best to highlight the existing value and obtain the best price possible, which may be lower than what you might get with an extra year or two of preparation.

 The next few years will see a rise in the number of business owners exiting due to retirement.  If you have plans to retire in the next year or two, now is the time to prepare your business, if you haven’t already.  Find a reputable broker you trust who has access to a large pool of buyers and ask them to do an appraisal in order to determine your most probable selling price.  The sooner you know that, the better.  An educated and experienced broker should give you a suggested price that can be fully defended in the marketplace.  This may be higher or lower than your expectations and you should seek a full understanding of the appraisal value before making any commitments.

 Now you can decide to engage the services of the broker to market your business, or you can decide to build more value into your business and adjust the appraisal when you think it’s ready.  An honest broker will encourage you to do what is best for you and your business and will encourage you to discuss your concerns with your professional advisors.

 Something to keep in mind is confidentiality.  Your business will be better off if you keep your selling plans to yourself until closing day so as not to alarm your staff, clients or suppliers.  Your business broker’s responsibility is to maintain confidentiality and market your business in such a way that it is not recognizable in the listings, carefully screening buyers before divulging further details, and ensuring that your business suffers the fewest disruptions possible throughout the sale process.

 When you sign the engagement agreement, you should be comfortable with the asking price, realistic about the time it may take to sell (6-9 months on average), and willing to maintain, if not build, the value of your business.  Also, you should have a clear plan for life after closing.  There will most likely be a transition period in which you commit to train the buyer, but after that, what will you do?

 Even if your business is in tip-top shape and prime for the market, take some time to consider your future and be confident that you are ready to sell.

Heather Loewen is a business broker in southern British Columbia with Sunbelt Business Brokers Pacific.

Increase the Value of Your Business – 5 Value Drivers

Are you considering selling your business?  Before slapping up the ‘for sale’ sign, you may want to invest some time and energy in developing a few areas that don’t show up on the balance sheet.  Buyers are interested in more than the bottom line.  Here are 5 value drivers that influence the goodwill portion of your asking price and can make or break a sale.

 

Put yourself in the shoes of the buyer.  You want to buy a business that can go through the transition smoothly with minimal disruptions.  You want to quickly and easily get a handle on what needs to be managed and focus on business development.  You want a business that is well organized with dependable and competent employees.  You want to earn a profit and recoup your investment as soon as possible.

 

Generally, as a seller, you want to keep your plan to sell confidential so as not to scare your customers, contractors, employees and financing bodies.  That would certainly drive your business value down.  When you prepare your business for sale and get questions about why these changes are happening, make something up.  Your New Year’s resolution was to become more organized – something like that.

1. Procedures

Do you have easily accessible procedures manuals that are updated on a regular basis?  With the help of your employees, put together some ‘how-to’ guides.  Any equipment or machinery should come with a manual that can be summarized in an easy to follow cheat-sheet format for reference.  Your front-line staff should be your priority, as they are quite literally the face of your business.  There is always a chance that employees may choose to move on when a new owner steps in and it is in your best interests to ensure that a new cashier can be trained efficiently so that you can focus on transitioning your business.

Chances are that you have some sort of training procedures in place already.  Now is the time to update them and iron out the problems.

2. Systems

Are your systems clearly outlined?  Does everyone know what to do, how to do it and who does it?  Get it on paper and streamline.  This could meet with some resistance if major changes take place; however, change is inevitable when the new owner steps in.  Some items to consider are: what to do if a key employee is absent; what to do with warranty issues; what to do with customer complaints; how exactly is widget A made; how are orders processed, checked and confirmed; who is responsible for what; who to call in case of emergencies.

It sounds like a lot of work, and can be if your current systems aren’t clearly defined.  This is good for you, your staff, your buyer and your selling price.

3. Job Descriptions

This goes with procedures and systems to some degree and goes a long way in creating a harmonic workplace.  You should know by now what the key positions are, the skill sets required and what the going salary rate is for those positions.  Keep in mind that your perception of these factors may be out a bit here and there, so why not bring in your key employees, one by one, and put together realistic job descriptions.  It is quite common in small businesses to have a strong staff loyalty to the owner, resulting in more effort for less pay in some cases.  When you do this exercise, remember that your staff will not immediately have the same loyalty to the new owner; therefore, do a final edit on your own, possibly reducing responsibilities and/or increasing expected salaries.

The point is to have written job descriptions and pay scales ready to show potential buyers.  The fewer surprises, the better.

4. Marketing Efforts

Just because you are ready to move on does not mean that now is the time to reduce your marketing efforts.  If anything, increase them.  You may not wish to pay for a whole new marketing strategy, but if that is a normal thing for you to do, then do it.  Make sure you have enough materials (brochures, business cards, etc.) on hand to get through at least the first quarter after selling because your buyer will be too busy learning your business to come up with a new program from scratch.  Maybe they will want to change everything immediately, but be prepared.

Now is the time to crank up the volume, update your website and make your company image shine.  More effort=more value=more money in your pocket after the sale.

5. Owner Dependence

Are you the Entrepreneur, the Technician and the Manager all in one?  If you are a one-person business, that can’t be helped and you are obviously looking for a buyer who can fill all of those shoes as well.  On the other hand, if you find yourself filling all of those roles while also having employees, it’s time to step back and delegate your workload.  Empower your staff, hand over the work to competent people, hire a bookkeeper or create a management position.  If you plan to hand over your business to someone new, it is better to prepare yourself by letting go of one thing at a time.  Try to whittle your job down to what can realistically be expected of a buyer so that when the time comes, your involvement in training the new owner will be greatly simplified and less stressful for everyone involved.  The buyer will appreciate this and it will have an effect on the selling price.

 

These are just a few non-financial examples of how you can add value to your business and ease through a smooth transition.  Talk to a trusted business broker to help you determine the best way to prepare your business for sale.