06 Feb Around the Web: A Week in Summary
A recent blog post from Exit Value Advisors entitled “Plan and Act Early and Often If You Want to Sell Your Business” discusses the risks that a business owner takes when they wait to plan their exit.
When many owners start their business, the last thing on their mind is when and how they’re going to sell it. Too often, business brokers see clients who don’t begin preparing their business for sale until they’re ready to leave it. Unfortunately, this often ends up being too late and can leave them losing money in the sale or even missing the opportunity to sell at all. The exit planning process ideally should begin from day one of your business, however if you didn’t do this it’s best to plan at least 3 to 5 years before you actually go to market.
Preparing the business for sale ahead of time drastically increases the owner’s chances of getting what they want to in the sale and creates a buffer against economic changes, unseen health complications or the unexpected loss of a key employee.
A recent article from Allan Taylor Mergers & Acquisitions entitled “Why 1Q is the Perfect Time for a Business Valuation” explains the benefits of having your company professionally valued at the start of a new fiscal year.
If you own a business, chances are that the majority of your net worth is wrapped up in your business. Having a business broker or M&A advisor conduct a valuation of your business at the beginning of the year is ideal for three reasons, which are:
- Your financials are up to date: You have a complete set of financials that are already prepared for your accountant from the year before. It’s only one extra step to send the same documents to a valuation professional.
- Goal Setting: The beginning of a new year is the perfect time to set forth a plan of action for the year ahead and a business valuation is an invaluable tool to base some of these goals and changes on.
- You have the entire year ahead of you: Once you receive the valuation, if there are things about your company you’d like to change in order to improve its value, you have plenty of time to do so for the optimal effect.
Whether you’re thinking about selling your business or simply looking to improve its value, having a valuation done regularly is very important. Most business owners become more aware of the way their business is viewed by investors or potential buyers once they have one done and almost every owner becomes aware of something they’d like to change as a result. Having this done at the beginning of the new year empowers you to make informed decisions to benefit your business for the rest of the coming year without adding too much extra work to your plate.
A recent article from Axial entitled “How to Reduce Owner Dependence Before a Sale” discusses four strategies to decrease how active an owner is in the business before going to market.
When a business is very dependent on any one particular person, it increases the potential risk that a new owner is taking on. Therefore, by improving the business’s ability to run without the owner present before going to market, you can increase the number of potential buyers and possibly the value of your business. Below are a few suggestions to help mitigate the risk of owner dependence:
- Make moves well in advance of a desired sale
- Bring in an independent board
- Build out the management team
- Document key information
Working closely with an M&A professional is the first step in evaluating the areas of your business that need to be addressed before marketing it for sale. Get a handle on owner dependence and other risks that a buyer may discover during the due diligence process by beginning the process well before it’s time to sell.