Is your business ready to be sold if someone want to buy?
Many new business owners don’t think beyond the point where they will get the business up and running and – most importantly – profitable. But done properly the time when you will really make really big money is when you sell and that’s what your ultimate goal should be.
Preparing a business for sale isn’t something that you can do overnight – at least not if you want to get a good price for it. Some people say that you should be planning a minimum of five years ahead from the sale date and there’s a lot of truth in that – if you haven’t had the thought in mind from the beginning. The problem is that no-one really knows what will be happening in five years, plus it’s difficult to get excited and motivated about something so far ahead. So what we need to do is cut down the ‘flash to bang’ timescale.
The way to cut down that run-in period is to be thinking about the sale date right from the start because that will get you into some good habits that will cut down the preparation time.
This means that you should be thinking about the following:
The financial state of the business
These should always be up to date with tax returns filed on time and all the figures going in the right direction. This only happens by monitoring them carefully and regularly. That way you will notice when people start to owe you money or start being late payers. Keep an eye on cashflow too as that can be the thing that cripples even a successful company (especially during times of expansion). Create a dashboard of key financial figures for your business and monitor them at least monthly.
Have you set up the business so that it runs without your daily input? If the company relies on you being there every day then you don’t really have a business, you have a job, and no-one is going to pay to buy that job off you. So your business needs to have the systems, processes and organizational structure necessary to function on its own.
Do you have the right team in your business?
Not only do you need the right people in your business but you also need the right external advisers around you. That core team, in my opinion, consists of your attorney, your accountant and your business coach. The attorney and accountant will keep you on the legal/financial straight and narrow and the business coach will help out with all the day to day running of the business. Having a coach’s fresh eyes looking at the business and keeping you pointing in the right direction is a key part to making sure you are not only remaining profitable but also as ready as you can be to sell. Once you make the decision to sell you will add two other members to the team – a business broker and your personal financial/tax adviser. Business brokers are like realtors for businesses; they know how to value the business and know the best ways to market and sell it and are critical to a successful sale. Your personal financial adviser is also key to ensuring that you personally keep as much of the money from the sale as possible.
Selling a business is, in some ways, similar to selling your house. If you’ve let all those odd jobs go over the years – paint peeling, shutters broken, damp patch on the ceiling and yard overgrown – then you’re going to have a lot of work to do before you sell. But if you’ve stayed on top of the housekeeping jobs you just need a quick tidy up and you’re ready to go when an opportunity arises. I know which way I’d like to keep my business and be ready for the big sale…