It is always a good idea to sell your horse before it dies. But when? And who will you sell it to? These are the questions business owners ask themselves from time-to-time but never answer. That is, until a pre-sale tune up finds them.
The most important thing for any business owner seeking to know about presale tune ups. They entail this: You can’t grow if you don’t have cash flow. Sellers that want to maximize their profits should be looking at pulling money out of the company as soon as possible. They prefer not waiting for an opportunity to turn around and reinvest in something new or different down the road where there will be potentially less upside potential than if they pulled all that money out today.
You know that one day you will have to leave your business. It might be because you’re retiring, transferring ownership to a family member, selling it to an employee, or just moving on. No matter what the reason, you want to get as much money as possible for your business when you do sell. Here are a few things to consider in order to maximize your profits.
Buyers want cash flow.
Buyers are usually buying a business with a cash flow that will allow them to make a living and pay off the business, assuming it is financed – and most are. They will look at excess compensation to employees and family members. They will also consider such non-cash items as depreciation and amortization. Interest expenses along with owner perks such as auto expense, life insurance, etc., will also be considered.
Appearances do count.
Another important factor is making sure your business looks attractive. This means taking care of all the little details – from making sure the signs light up at night, to painting and replacing old equipment. If something is not included in the sale – like a picture of Grandfather Charlie who founded the business – remove it. An attractive business will sell for much more than a tired and worn-out looking place.
Everything has value.
You know that everything has value. Such items as customer lists, secret recipes, customized software, good employees and other off-balance sheet items have significant value. They may not be included in a valuation, but when it comes time to sell, they can add real value to a buyer.
However, just because these assets aren’t on your balance sheet doesn’t mean you shouldn’t pay attention to them. In fact, it’s important to give them some extra love before you go through with a sale. That way, you can be sure that you’re getting the most out of your business. Make sure also that the buyer is getting the most out of the deal too.
Eliminate the Surprises.
The buyer will want assurance that they’re getting a good deal on your property. Make sure everything is in order by having an expert go over all aspects of the company with a fine tooth comb. There are various aspects of the company that will need attention. Legal, financial and governmental problems must be all set prior to placing your business up for sale.
The best way to get this done is by hiring a professional broker who knows what buyers look for when evaluating companies like yours. They also understand current market conditions. Once you’re ready, your broker can assist in marketing the business to potential buyers. They can surely help you bring more money into your retirement account.