Only 30% of Business Sellers are Successful in Selling their Businesses
Waiting until you need to sell your business to prepare for the sale could cost you thousands of dollars from the potential sale. It is never too early to plan the exit strategy for your business and to strengthen the business’ position in the marketplace.
Selling your business is typically the single most important decision for a business and the business owner. Owners want to maximize their sale price and get a return on their investment. Unfortunately, the Small Business Administration reports that only 20% of potential business buyers actually buy a business and only 30% of business sellers are successful in selling their business.
Here are some important tips that can help you beat the odds and have the ingredients for a strong, successful sale.
From the inception of a business, an exit strategy is essential. The creation, structure and business processes should be designed with the end in mind. This work not only helps in selling the company, but typically will also help the business’s success. Passing the business on to the next generation, selling it to the employees or selling to someone outside the firm are all viable options for selling the business, but each requires a different strategy for the business structure and the sale.
Build a Great Team
Selling your business is a complex process and is best done with a team of professionals for advice and expertise. Business valuation, business brokers, investment bankers, M & A intermediaries, real estate professionals, attorneys, accountants and tax professionals are all essential to the process.
You need to know the market, the comparable sales of similar businesses, the value of your business and any legal, tax or financial considerations of the sales process. Each of these is an expertise, and you should not rely on any particular professional for advice across these areas.
Do the research to find a team with experience and expertise to increase your success and maximize the sales price. While the ultimate decisions will be yours, it is critical to be armed with professional insight and experience.
By the Book
Most sales will require three years of accounting and financial data; the more structured and professionally prepared the better. Every level of the business should have clear, transparent and precise transaction data. Human resource audits, accounting, tax filing and operational data should be clear, precise and in full compliance.
The clarity and transparency of the records will set a tone that the business is well run, well managed and that all information is accurate and in compliance. This increases the perception and value of the business.
Standards of Operation
In some businesses the real value lies in the personality, leadership and charisma of the owner; making a successful sale extremely difficult.
It is important to create standard operating procedures, manuals, training materials and clear systems and processes including applicable metrics to create a turnkey sale. Move the business away from the focus of the current owners, show where the true profit lies and create a strong system for operational processes, internal compliance and sales/marketing processes.
Keep records of sales/marketing promotions, customer preferences and successful marketing interventions to show the revenue potential of the business.
Selling your business is a complex process that requires planning, professional support and internal documentation and structure. By creating solid process systems, clear and transparent accounting and recording and building a team of seasoned professionals you can increase the value of the business and the success of the sale.
For most business owners, selling the business is THE BIGGEST event in the life of the business, and possibly in the lives of the owners. Planning for success makes the process far more successful – failing to plan is planning to fail.
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