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Business owners decide to sell for a many different reasons.
For some, it is primarily an instinctive conclusion inspired
from a need to resolve problems or a desire to capture opportunities.
For others, it may be a judgment motivated by pursuit of long
range business or estate-planning goals.
Whatever the motivation, implementation of strategic plans
is the most important element for positioning the company
being sold so as to obtain the best benefits. The best outcome
is realized when the owner implements, a couple years in advance,
strategies that maximize value when the business is sold.
If you plan to sell your company in the future, a combination
of strategies should begin to be considered and implemented
in a methodical way to maximize the company’s marketability
and value:
1. Position the company to improve
its marketability. Look at your company from
a buyer’s perspective and make necessary adjustments.
Is the company ready to offer new products or services to
the marketplace? Are the company’s facilities and equipment
capable to accommodate expansion and is the remaining management
qualified to achieve gains in market penetration? A company
is more appealing to buyers if they think they can create
value in the purchased business after the acquisition is completed.
2. Focus on profit and growth.
Many companies focus on minimizing taxes rather than on maximizing
income. However, from a buyer’s perspective, higher
incomes and growing profits minimize risk and make the company
more desirable.
Increasing trends in a company’s income and profit levels
substantiate the company’s ability to make money in
the future and significantly increase its sale value.
3. Produce valid financial statements.
Make sure your financial statements are accurate, timely and
professionally prepared. Prospective buyers will conduct a
thorough due diligence investigation of the business. If existing
financial statements are factual, the confidence level of
the due diligence team and the likelihood of a successful
transaction are greatly enhanced.
4. Develop the depth and quality
of your management team. The composition and
quality of the management team is a key concern for buyers,
especially since it is normally expected that the owner will
not stay long after the sale. Even if it seems counter-intuitive,
take steps to de-emphasize your own value in the eyes of the
prospective buyers and strengthen that of your management
team.
5. Build relationships early in the process with
good professional advisors. Your CPA, Management
Consultant and attorney are very important in helping you
to posture the company for greater sale value and marketability.
The selling process is not easy and it can be emotional and
stressful, — and the assuring support of trusted advisors
can be invaluable. Also, when negotiations become difficult,
your advisors can step in and protect your interests.
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