Member Article

How to sell your business.

As an Entrepreneur you will have spent years honing your business and making it the very best it can be. You will undoubtedly be an expert in your product or service and will have often grown the business successfully from very small beginnings. However, often entrepreneurs and business owners are not as good at stepping back and looking at how to optimise the value of their business. They get caught up in making money in the here and now. When you start a business you often need funding which comes from a business plan. That business plan takes into account the idea/product, the people you will need to help you, what money you will make and how much you will need to facilitate it all. In the same way that you plan your business as the start, plan how you might sell it. The most valuable and attractive businesses for sale are ones that are on a clear upward financial growth trajectory. You need to be able to demonstrate that within your business structure. Make a plan. How will you grow your business. Who will you need to help grow your business. How much would you like to sell your business for? Come up with an exit plan because the decisions you make early on in the business will enhance your business down the road and ensure you get the best price for all your hard work. It is common for an entrepreneur or business owner to grow their business with the aim of selling it for a profit eventually. If this is your goal then do not make the common mistake of thinking that selling your business is a fast and simple business. In reality it is likely to take you years to get your business ready for sale and to achieve the best price. You will need an exit strategy to maximise your business value. As part of that you must work out how to optimise the value of your business over a period of time. You should spend at least three years on an exit plan. As part of that business plan independent advisors like coaches and mentors will be invaluable in guiding you. It will involve a lot of stepping back and delving into parts of your business which are not being currently optimised. An exit strategy is necessary because maximising your business value may be the difference between attracting multiple buyers to drive up your sale price or only attracting one buyer who drives the price down. The very worst case scenario is that you attract no buyers at all and all your hard work is for nothing. An exit strategy will take time. Starting your exit plan at least three years in advance will enable you to think about exactly how you want your business to be viewed when it goes to sale. Many entrepreneurs have worked long hours and spent valuable time making the company a success. Many then decide to sell in a heartbeat. However, when exiting a business it should take as much thought as you put into starting the business. It could take you 5 to 7 years to get it to a place where your business is ready for sale. Don’t rush it or you will lose value rather than add it. When running your business you need to make sure it can withstand an unexpected event. Be prepared. You must always have a plan of what to do if the economy is rocked and your business is affected in some way. It’s the same when exiting your business, plan to ensure your business can still sell for the maximum price despite the economic landscape which is always subject to change. Almost every business can be sold at any time if it is positioned correctly and very often for more money than anticipated. In the US around 80% of businesses listed for sale on an annual basis do not sell. If you don’t have an exit plan you may find yourself backed into a corner and forced to sell. In that situation the buyer has all the power and you may find yourself selling for a lower price than you anticipated. Hours of hard work will have been spent on growing your business so it is important you spend time maximising the value of your hard work and turning it into an attractive proposition for the buyer. A buyer is only interested in getting the best business for their money, they are not concerned with how hard you worked to get the business to where it is. They will pay for financial metrics so ensure you have obvious value in your business. Think about how you will approach this sale. If a business is generating income and has a good reputation then there is no reason why it won’t sell with a strong exit strategy. When you structure your business for sale, ask yourself these questions: Would you pay what you are asking for your business? Do you have the metrics to back it up? You can lose up to 50% on the value of your business if you don’t have a strategy. The business must be properly positioned and have a story to tell. That will create value overnight. Otherwise you may find your deal is optioned and structured in a such a way that you lose value. It is important there are no weak spots for prospective buyers to take advantage of.

Peter Boolkah is a business coach with offices in the UK and US. He has over 30 years experience in business and uses that knowledge to help grow businesses.

This was posted in Bdaily's Members' News section by Lucy Hood .