You have worked long and hard and built a substantial business. In the future, you plan to cash out but are you preparing to get the best price? An orderly and profitable transition requires planning well in advance. Here are some things that you should be doing now.
Review your corporate structure on an ongoing basis. This will enable you to maximize the proceeds you retain from your business's eventual sale. Tax rules make it difficult for any quick fixes that give rise to immediate benefits. Consider changes to structure now that may result in more favorable tax treatment when the business is sold in five or ten years. Sit down with your tax advisor and review your current business structure and its appropriateness for your business's eventual sale.
Keep your business vibrant. A potential buyer is going to pay significantly more for a business that demonstrates a consistent track record of growing revenues and profitability. However, all too often a business is allowed to stagnate or even decline because the owners have taken their foot off the accelerator. Recognize the warning signs and take corrective action to get the business growing again. Choosing to sell while the business is buoyant is far superior to forcing a sale because poor health or other “burn out” related issues have impacted revenues and reduced the business's value.
Pre-plan your confidential marketing effort. You will need to gain exposure to multiple buyers, especially synergistic buyers. Synergistic buyers are those individuals who, because of their location, complimentary customer base, financial resources or market position, can profit more from owning your business and are therefore willing to pay more. Alternatively, you may have an employee who could be groomed as your successor and the buyer of the business. Be careful not to let emotion cloud these decisions. This is a valuable asset that you are selling.
Consider the economic environment. It isn’t possible to control the external environment, such as interest rates and strength of the economy. Low interest rates and a low inflation environment with plenty of liquidity and a buoyant economy create an ideal scenario for mergers and acquisitions. However, as we all know, the economy goes in cycles. With the sale of your business on the horizon, consider the current economic conditions. You may need to move the sell decision forward or back to plan for an orderly transition and get the best value for your business.
Get professional help. Unless you have a background in taxes, legal issues and merger and acquisition work, you will probably unknowingly make a multitude of costly mistakes by trying to sell your business yourself. Those mistakes, often driven by emotion, may cost you substantially more than any fees paid for competent, impartial, professional assistance. Do some homework on various alternatives. Become informed by attending seminars regarding such topics as tax issues and estate planning. Ask your accountant or lawyer to recommend some of these general knowledge seminars.
Above all, think with your head and not with your heart. A decision to sell can be very difficult for a host of good reasons. Seek outside objective advice from professionals. These individuals bring a fresh perspective and insight that will assist you in making good strategic decisions for the future of your business.