Three Keys to Selling Your Business

By Glen Herman, Creative Business Solutions

Is now the time to sell my business?  Am I ready to sell?  What does “ready” mean?  Am I in a position to sell, do I have a choice?  What is my business worth?

Succession planning, transition planning, and exit strategy are terms we use in discussion of a transfer or sale of a business.   Timing effects each transfer of a business, but with proper planning, time can be on your side.

I’m often asked: “how can I get the most money out of my business?”  While the answer to this question is unique to the specific business, there are some universal truths to maximizing the amount of money at the sale of a business. 

The most important considerations in maximizing the proceeds from the sale of any business are development and documentation of systems and processes.  Buyers are typically looking for organized, profitable businesses that are structured (in terms of team and established organizational flow), and have systems in place for sales, work flow, inventory management, billing and operations. 

Financials- It is critical that owners have accurate financials that are current.  This allows for the management of the business by the numbers.  Buyers will be looking at net profit, seller’s discretionary earnings and earnings before interest, taxes, depreciation, and amortization (EBTIDA). 

Team structure- Having a professional team that is selected carefully and trained systematically will make your business more profitable, and therefore more attractive to a potential buyer.  Structure of a business is a key component to a business’s success, but also a contributor to the “good will” value in a sale.  Think of it this way… If a buyer can purchase a business that is structured and running well, it allows the buyer to “work on” the business, not “work in” the business. 

At the end of the day, we have to look at the financials and “good will” of any business when we place a value on it.  Other considerations include market factors, inventories, real estate, and buyer appetite for businesses in the geographic area of the business.  Employee experience, skillsets, and certifications are also considerations of potential buyers.

A valuation of your company should be updated every 3-5 years.  This will allow you to make timing decisions, and also ensure the highest value will be received in the transfer of the business. 

Glen Herman is a Business Intermediary for Creative Business Services in Green Bay, WI. Contact Glen at 920-719-2270 or at [email protected].

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