Five Areas to Address before Selling Your Business
We are in a remarkable period of transition. More businesses will be changing hands in the next decade than has occurred in quite some time, but the business owner will not get full value for their business, or perhaps even get it sold, unless they heed these five areas before they attempt to sell.
Two to three years before you are to sell the business is the right time to assess the present employees and their value to the business. If they are dead weight, it will show in the profitability of the venture and the weight of the payroll. No business is too fat to hold on to dead weight. It is also a key time to analyze the employee benefits as this is a key tool for employee attraction and retention and is also a liability to the business owner if it is done improperly.
How do you keep in contact with clients and customers? Do you have a strategy for reaching your client base that they appreciate? This will be a priceless tool as you transition your business for sale. It will allow the new owners to feel secure that the flow of business will not dry up with the exiting of the previous owners due to the evaporation of good will.
A business is ultimately judged by how much profit can be sustainably squeezed out of a business and how stable it is. It may take three to five years to stabilize a business and its cash flow for a buyer to find the business attractive. This is a time to analyze systems long in place.
If the business is sold, will the present wholesalers continue to service the company in the same manner? This is a conversation that must occur as the fluctuation in supplies to a business can strangle and suffocate a business if this is not secure and stable for the new owners.
Does the business have a tried and true way of bring in fresh clients to the business and have they ascertained if the present methods are truly reaching their target market? This is also key to the new owners because as old clients will fall off the books, new clients will have to be retained to keep that profitability going.
Though this article can go on for page after page, if these few areas are focused upon, with the help of outside consultants, client surveys, third party audits, and a great business broker, a business sale can occur with a minimum of stress and strain on the present owners.