If you are thinking of selling your business – now or sometime in the future – advance planning is key to help clarify your options, increase your valuation, and significantly improve your chances of successfully closing a transaction. Below we've outlined four key issues to consider as you begin to plan for an exit:
• Continue to drive revenue. As a general rule, businesses that are showing growth are more attractive to buyers, and sell for a higher valuation. Buyers expect the growth to continue, which should generate higher potential future revenue, and drives a willingness to pay more for your business. With a potential sale in mind, it can be tempting to scale back business development efforts or hold off on exploring new opportunities. But it's critical to keep up sales momentum throughout the process to sell your business, and to demonstrate revenue growth up to the point of sale and beyond. Nearly every business owner we speak with knows of at least one or two strategies they could or should be doing to drive some incremental revenue. If you know of any relatively straight-forward opportunities to drive revenue, now is the time to execute.
• Put yourself in a buyer's shoes. As you prepare for a sale, take an honest look at the company and think about the business from the buyer's perspective. What are the key advantages of the business, and what are the key challenges? Almost every business has challenges that could be perceived negatively by a buyer. Some issues could include, for example, customer concentration, poor trademarks, limited recurring revenue, or outdated marketing programs. To the extent possible and depending on the time you have available, try to resolve issues that can be fixed. Our e-book, “Preparing Your Business For Sale,” has a complete list of items to address and consider, download your copy here: https://www.hughesklaiber.com/white-papers
• Approach the sale professionally and strategically. The way in which you approach the sale can have a significant impact on value. First, know yourself, and understand your personal and financial goals. A self-aware and determined entrepreneur with realistic, defined goals will be more successful than an entrepreneur who vacillates or takes too long to make decisions. Second, put together a professional team and sell the business professionally. In today's hot market, it's not unusual to be approached by a buyer out of the blue – but you are more likely to maximize valuation by talking to multiple buyers within the framework of a professional M&A sales process, and negotiating with the understanding that there are other buyers in the wings.
• Time the sale of the business well. To maximize valuation, the best time to sell is when your business is on an upswing, when the economy is growing, and when you are personally ready for the sale. In a strong economy, buyer demand pushes up overall valuations, and in a downturn, multiples drop. If you are considering a sale, don’t wait until sales slip or the economy weakens.
Executing some of these four strategies within the context of an exit plan can help drive up the value of your business. If you are considering a sale now or in the future, let’s talk. Email us or schedule a call today.
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