07 Feb Around the Web: A Week in Summary
A recent article posted by SmallBusiness.co.uk entitled “What company owners can learn from previous businesses sold” gives the do’s and don’ts when it comes to selling a business.
Don’t make a snap decision – Preparation is everything and you want to make sure you have time to analyze the best time to sell, maximize the appeal of your business and be ready for any questions that buyers will ask.
Don’t overvalue your business – Buyers will do their due diligence so make sure your valuation is accurate and realistic.
Do be fair, honest and transparent – It’s always best to disclose any uncomfortable facts up front because the buyer is likely to find out in the due diligence process anyways.
Do prepare your business for sale – Be ready to show prospective buyers three years of audited accounts and any other documentation they may request.
Do make yourself dispensable – Prospective purchasers will want to see that the business can thrive on its own after you leave and that there is a good management team in place.
Lastly, it’s good to adopt an open approach and show buyers that you are willing to disclose any relevant information they request. This will give the buyer more confidence in you and buying your business.
A recent article posted on PR Newswire entitled “Business owners’ love of work may hinder succession planning” explains the parallels between the number of business owners with no plans to retire and the lack of succession planning. In a recent poll, over 70% of business owners said they are not planning to retire, don’t know when they will retire, or do not plan to retire for at least 11 years. The survey also reported that 2 out of 3 business owners do not have a succession plan or a clear understanding of the importance of one.
Even if there are no immediate plans for retiring, business owners should have a succession plan in place to protect the business, partners, employees and customers. If something were to suddenly happen to the business owner such as serious illness or an untimely death, a succession plan would help make sure everything goes smooth with the transition of the business.
To get started with creating an exit plan, business owners can take 5 simple steps:
- Set goals & objectives
- Determine the value of your business
- Consider options for the business in the case of disability, retirement or death
- Develop a plan and documentation with an advisor, attorney and accountant
- Fund the plan
You never know when something unexpected could occur, so it’s never too early to start creating a succession plan.
A recent article from the Denver Post entitled “Selling your business? Focus on the key business drivers so buyers pay top dollar” explains how focusing on certain key factors of your business can help you get the highest possible price when selling your business. Although many key business drivers vary among industries, there are four drivers that apply across the board:
- History of increasing revenues and profits over the past 3-5 years
- Strategic business plan that shows strong growth, competitive advantage, and products or services that can be sold across multiple industries
- Future cash flow including expected EBITDA performance, expected working capital investment requirements, and expected fixed-asset investment requirements
- Strong management team and strong operating systems in place
Business owners should get a detailed business audit and analysis from a business consultant so they can see where their business’s strengths and weaknesses are. This will show the owner what business drivers to focus on improving in order to get the highest price for their business.