Business Brain Food

Business Owners: How Do You Prepare a Business to Sell?

 

Run your business for the Buyer! Sounds simple, doesn’t it? Here are some things that a buyer will study before he or she determines how much he or she will pay. Although the list is not all inclusive, these are some of the categories you should focus on to increase the value of your company.

 

1. Financial Strength. Buyers want to buy a company that is growing and profitable. The buyer has to be able to cash flow the business after debt service and capital expenditures. The cash flow has to cover all of the buyer’s personal expenses.

 

2. Owner Importance. Do you as the owner own the customer relationships? If so, you need to transfer those relationships to someone else in the company before you sell. 

 

3. Labor. Buyers will want key employees to stay, but sellers can’t expect the buyer to guarantee job security.

 

4. Diversity and Stability of Customers. How many active customers are there? Will they stay with the new owner? What’s the customer concentration? What will happen if the company loses one or two key accounts?

 

5. Vendors. Are there any exclusive relationships? Will they stay with the new owner? Are there contracts in place? Are they transferable?

 

6. Repeatable Systems and Processes. The efficiency of your business has a great influence on profitability. The more profitable you are the more money you will collect at the closing table.

 

7. Competition. How strong is your competition? Are technological changes going to give a major competitor with more cash a significant advantage?

 

8. Facilities. Clean up your business! Buyers can’t see through clutter and dirt. 

 

9. Location. Will the buyer lease or buy the building? What’s the length of the lease? Is it transferable? Are there any changes in the area that will affect the location (negatively or positively)?

 

10. Future Outlook. Does the business have the potential to grow in the future?

 

Rate yourself in each of these categories – from the eyes of a buyer. If you rate anything less than a 9, then develop a detailed plan to improve your business. Then, TAKE ACTION!

 

Visit www.dovetailadvisors.com to learn more.

Business Owners: Is Your Business Ready to Sell?

The exit of your company is not an easy task – unless you simply want to close the doors. It’s a sad statistic, but I’ll throw it out there anyhow. 9 out of 10 small companies on the market will never sell! Wow! What if that is you? Are you relying on that payday to finance your next chapter in life? If so, read on…

 

As a seller, what can you do to protect yourself from this happening to you?

 

1. Determine Your Exit Goals. Whether you are selling your company this year or ten years from now, the best time to plan your exit is TODAY! Begin by determining how much you need to net, after taxes, from the sale of your business in order to leave your business in the style you want and deserve.  
2. Get a Valuation of Your Business Today. All too often sellers wake up one day and say “Enough is enough!” They are burned out or they are having health issues! For those reasons, and others, business owners should always know the value of their business.
3. Determine the Gaps. What’s bringing the value of your business down and more importantly, what will increase the value of your business?
4. Develop an Action Plan. Prioritize the categories you have identified as gaps in the last step and develop a detailed action plan to improve your business.
5. Take Action! With your action plan in hand, you must take action. This is the only way you will be able to achieve the goals you established in step one.

 

If you are like most business owners, your business is probably your most valuable asset. Treat it as such. Follow these steps to increase the value of your business so you can leave in the style you want and desire. If one day you wake up and have to sell the business, then you’ll be more prepared to meet your exit goals.

 

Want to sell your business? Visit www.dovetailadvisors.com to learn more.  

7 Exit Planning Strategies for Business Owners

At some point, every business owner will exit his or her business –horizontally or vertically. Those of you who plan properly can leave your business in the style you want and desire! Those of you who don't plan may be in for an unwelcomed surprise - you may never be able to leave your business on your own terms. Statistically, that’s 85% to 90% of business owners. What can you do to leave in the style you want and desire?

It's really quite simple...PLAN!

1. Establish Your Objectives - You need to know when you want to leave, how much you need after taxes and to whom you will transfer your business.
2. Determine the Value of Your Business - Get a formal valuation and conduct a reality check. Not all valuations are created equally. When you are reviewing your valuation, take the emotion out of it. Put yourself in the shoes of the buyer. How much would pay for the business? Always remember, buyers pay for history and buy for potential.
3. Preserve, Protect, and Promote Value - This is the time you want to run your business for the buyer. There are many ways to increase the value of your business. One sure way is to increase the cash flow.
4. Convert Business Value to Cash - This is important for business owners who sell their business to an outside buyer. Work with a CPA who understands transactions and how to minimize your taxes. Some of you may need to begin this process ten years prior to your exit.
5. Sell Your Business for a Note - If you plan to transfer the business to family member, co-owners, or employees you must plan ahead to maximize your financial security and minimize your taxes.
6. Have a Contingency Plan - You must put the proper contingency plans in place so the business will continue if you die or become disabled.
7. Plan Your Wealth Preservation - You must also protect and provide for your family if you die or become disabled.

Visit www.dovetailadvisors.com to learn more about our Five Step Planning Process