By Dave Driscoll
Planning to sell your business is easy to put off…and some people believe they will never sell. Maybe you analyze the economic situation, your industry trends, and your personal motives, wishing you had a crystal ball to know exactly WHEN to begin preparing to sell. But, one thing is certain, eventually you will leave your business one way or another. Regardless of when – or if – you intend to sell your business, keeping that ultimate goal in mind will enhance your business value in the meantime, and protect you from feeling stuck in the business long after you’re burnt out.
Planning for the eventual sale of your business far in advance will allow you to keep your options open and receive the best return for your blood, sweat, and tears so you can embrace your life beyond business.™ Create a solid framework for the future of the business – and your post-sale finances.
Follow these simple strategies and habits to best position yourself to eventually leave your business:
- Build a strong second-in-command and empower employees.
Healthy businesses are not owner-dependent. Your company will be more successful if you utilize and encourage your employees’ strengths. Develop an organization that can run seamlessly while you take an extended vacation.
- Establish and document processes and procedures.
Ensure consistency and efficiency in delivering your products/services, as well as employee relations with a thorough company handbook and operations manual. This builds business value now and long-term, this documentation provides the ability for a new leader to replicate your success.
- Keep accurate, meticulous financials and review them quarterly.
Creating a profit and loss statement and balance sheet should be a non-negotiable habit, using Quicken, QuickBooks, or an accountant. Document any and all owner’s (seller’s) discretionary expenses. Review your financial results quarterly to recognize trends, strengths, and any problems to be addressed promptly.
- Understand your customers and their pain points so you can offer solutions.
Regularly reexamine and anticipate your customers’ changing needs in the face of societal and technological developments, as well as trends within your industry. Flexibility and innovation are valuable.
- Differentiate your company’s offerings from your competitors.’
If your company fills a unique niche, it could eventually be a valuable add on for a competitor who would like to expand with your complementary specialty. Rather than eyeing your competitors as enemies, consider that they could be logical buyers when you’re ready to sell your business.
- Invest in technology and innovation to keep the business on or ahead of the curve.
I’m not suggesting jumping on every technological bandwagon; you don’t have to be the first in your industry to embrace new technology or ideas, but make sure you aren’t the last either. No one wants to buy a business that is operating 20 years in the past.
And don’t forget the personal side of planning:
- Realistically define your lifestyle expenses, the value of your business, and your anticipated tax structure. Don’t guess at this!
- Consult your financial advisor for a realistic picture of your future finances and an accountant regarding tax structure on capital gains.
- Hire an M&A broker/advisor to perform an objective market valuation of your business. Find out whether the market value of your company will sustain your lifestyle long term, while you still have time to increase the business value.
- Take a short break each year to honestly assess your level of passion, energy, patience, and drive for the business.
Don’t ignore the early signs that you should be taking steps toward your exit before you and the business value suffer.
- Nurture your interests and hobbies.
Inevitably, your business is a major piece of your life; devoting time to other aspects of your personality is a healthy reminder that you and your business are separate entities. Establishing hobbies, interests, and relationships now will keep you feeling alive and connected after you exit your business.
- Make peace with the emotional side of selling your business.
This is not to be taken lightly – selling your business can feel like losing a large part of your identity. Openly discuss with your family and confidants how you will fill your days and find meaning.
Sadly, many businesses across the U.S. don’t sell at all. Often the seller waited too long and lost the drive to sustain profitability and business value declined, or the financials aren’t structured to present a consistent story. Frequently those businesses are priced too high, based on emotion rather than objective business value.
To achieve the life beyond business™ you envision, always operate your business so it can sell tomorrow for maximum value and minimal taxation. Then when the time is right, you can confidently reap the rewards of the business value you’ve built.
Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions business broker, business valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at [email protected] or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.
As seen in Dave’s Small Business Monthly column