When selling your business, you want to get maximum value. That’s what you want. A buyer, on the other hand, isn’t always interested in paying you top dollar. Even if they are, they still want to get the best buy they can for their time, energy, and money. Consider these strategies when you are relaxing by the pool one afternoon and thinking about your future, without your business.
Strategic Thinking Maximizes Assets
One of the most profitable ways for a business to realize maximum value is to plan the sale years before it’s sold. Yea, I know some of you are thinking that might not be realistic, but it is.
The day you get into business is the day you should also have a plan to get out. Many times, getting out of the business is more challenging than getting in. Making your business “saleable” creates the opportunity to get maximum value.
By planning ahead, this gives you time to organize or stabilize your accounting. Whether you have an in-house person or use a CPA firm, it’s important to make sure all the reporting documents support GAAP (Generally Accepted Accounting Principles) methods. This allows communications in the negotiations to go much smoother because you are all on the same page in reading and interpreting the financial statements.
Consider having a CPA firm conduct a financial review or audit. Having them create a Quality of Earnings Report to show one-time events or anomalies could also be helpful. Doing all this before a sale begins gives you time to make the necessary corrections or adjustments. You don’t want to wait till you have a buyer in motion because it slows down what will already be a lengthy process.
Do You Stay On or Not?
If you are an absentee owner, this offers different scenarios vs. an owner working in the business every day. So, depending on your particular business model will determine what future role you could have in a new company or if you even want one. Your role and the compensation is open for negotiation. In my last two companies that I sold, I stayed with them for a specific time period but didn’t want to be involved past that point in any capacity. That is your choice to make.
Good Times or Bad Times: Who is in Charge?
During good times, it’s easy to get sloppy and add expenses that can go unchecked. It’s normally bad times that we find out just how good of a business manager we really are.
Growing a management team is an essential part of leveraging talent and scaling a business. This doesn’t happen overnight. Selling at a maximum value typically includes the business’s human assets, so you want to make sure these good people are at the top of their game. Having systems in place that a new owner can see, feel, and touch brings real value to the table. If these “SOP”‘ (standard operating procedures) are written, it adds even more value. If everything is verbal, it certainly adds more questions. When you buy a Mc Donald’s, you have to go to Mc Donald’s University, so you get the playbook. With years of modeling the right behaviors and documenting their processes they’ve created a successful pattern of business. Any business can do this.
As the World Turns- Drama During the Transaction
In my experience helping owners buy, sell and merge companies, we learned early that even though we had a closing date, we had to change it 2 or 3 times before closing the deal and doing the paperwork. There were always technical or emotion curveballs to deal with. Once a sales transaction starts, know there will be several twists and turns.
Many owners are emotional about their business. This is why consultants like me were involved because we took the emotion out of the deal. In negotiations, there are strategies played that can cause uneasiness or concern. How these are handled can determine whether the agreement moves forward or not.
Keeping a cool head and a rational approach is always better. Remember, your goal is to sell the business, not get into an argument over how much the furniture and fixtures are worth. Don’t get bogged down in the little things; keep your eye on the end goal.
Be professional and know that nearly all disagreements can be worked out. They usually are a misinterpretation or a lack of information that triggers it. When a concern comes up, ask more questions and dig deeper before responding. You’ll find the root cause this way, and that’s what you want to work through, not all the emotional drama stuff.
Selling your business starts well before you talk to a buyer. Plan for it and you’ll realize more value and money in your pocket.