As a business owner, you know that every major decision requires careful thought and preparation. What bigger decision is there than opting to sell your business?
If you think a sale may be in your future, it’s not as simple as putting a for-sale sign up and awaiting the calls.
There are a lot of things to take into consideration and many steps to prepare. Making strategic decisions will help you achieve the highest possible valuation for your company.
Here are some tips to get you started:
•Remember that you’re selling the company, not yourself. Prospective buyers will want to see a strong supporting management team. The MG Brokers help to show that the business will continue to be successful long after you’re out of the picture; that is essential for the potential buyers to see. An easy question to test this is: If I go on vacation for a month, can the business run on its own? The best advice is to “make yourself redundant” before a business sale starts as this can become a deal breaker. A buyer should be buying your business and not you. You need to demonstrate that the business can flourish without you so that you can exit.
•The brokers at Mutual Growth will help you to think about ways to maximize profitability before deciding to sell your business. Starting these initiatives in the middle of a sale process means you missed your best opportunity to enhance value. Ideally you want to have demonstrable and higher earnings when it’s time to sell. Focus on achieving those operational efficiencies, cost reductions and other value enhancers in advance so they’re easily demonstrated to a buyer.
•MG Brokers will show you that you don’t need to wait for a transaction to clean up the balance sheet and improve efficiencies. MG Brokers will look for opportunities to remove non-business assets (does the business really need that boat or condo? does the business pay for personal clothing, cell phones, trips?) and monetize redundant or under-used assets ahead of a transaction. MG Brokers will help you to focus on spending and expense control opportunities.
•Having a good CFO/controller/director of finance in place is a good start to implementing strong financial controls. MG Brokers will help you to really understand your business operations and look at profitability from an objective standpoint. It's important for MG Brokers and potential buyers to have reliable financial statements and accurate, timely reporting are attractive features that often influence a buyer’s decision. Presenting your business with solid cash flows, strong management teams and lower capital expenditure requirements, will position your business as an attractive acquisition.
•Diversification is more than just a concept for managing stock portfolios. For many of our buyers, an ideal business has a broad customer base with little customer concentration. Some customer concentration may be an unavoidable reality for many businesses. MG Brokers will review your portfolio and look to have organized files, clear descriptions of clients and signed contracts with customers. Additionally, it is great to be on approved bid lists provides potential buyers with confidence that customers will be retained with the business even after the transfer of ownership.
•When buyers come to MG, they're informed, they've researched and they understand good businesses — but it's an MG Brokers JOB to “show them the dream”. Take the opportunity to clearly articulate your growth story to buyers we bring and help them understand the vision and goals you’ve set for the business. They NEED to hear it from you! Describing the company culture can be a key to helping buyers understand what the future business and prospects could look like.
•MG Brokers need to sell the future of the business. To most buyers we’re selling the future and future cash flows. It's important to have a realistic and supportable forecast. This points to the credibility of management and the quality of the business. MG Brokers need to provide potential buyers with forecasts that are reasonable, believable and achievable (with some degree of specificity or detail) can further demonstrate the underlying value of a business.
•MG Brokers can help with succession plans when the family is involved. But sometimes, when it’s time to sell the business, the “family” may need to come out of the family business. MG Brokers will help to address hidden family issues and clean up excluded assets that may be included in the business and restructure “shareholder expense habits” to proactively normalize your books for the sales process prior to putting the company up for sale. From a buyer’s perspective, this provides increased confidence in the business and gives greater certainty in the negotiations and decision-making process.
•Working capital is often an overlooked source of value, but it can be difficult for an owner to firmly grasp. Working capital is the lifeblood of a business, and buyers expect to receive a “normal” level. Many private businesses have challenges with properly managing this “cash” in the business and many have room for significant improvement. MG Brokers may suggest a review of working capital which takes both effort and time, but it can free up “trapped” cash and can lower the total level of working capital buyers expect to be delivered.
•MG Brokers may advise you to seek advice from one of our seasoned advisors, financial analysts or forensic accountants who can provide you with sizable savings and add value. It is critical that you have the right team of professionals helping you with accounting, tax, legal, transaction and mergers and acquisitions matters. Each will have their own role in the sales process and can provide you with different perspectives and expertise in their respective areas.
Growth is never by mere chance; it is the result of forces working together.
Mutual Growth will help your private business prepare for sale. You grow. We grow.
Contact us at 631.913.8186