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The First Steps to Selling Your Business – Part 1

Oct 21Robert Burger

If you own and operate a small to medium business, you spend more of your time working on daily operations and immediate concerns than on long term planning. You probably have not taken a lot of time to plan for the day that you no longer want to run the business. Will you turn it over to family members, sell it to employees, liquidate it, or sell it to a third party? If you’re selling it to a third party, how do you prepare for the sale? How do you determine the appropriate value, and market the business effectively? How can you accomplish the transaction while maintaining control and growth at your company?
If you are like most owners of small-to-medium businesses, you probably do not have an exit strategy and a plan to achieve it. As you may already know, there will be an unprecedented number of privately owned businesses for sale in the coming years as baby boomers find the exit. Baby boomers will be attempting to sell an estimated seven million businesses on the open market in the next 15 years.
For business owners who are ready to discuss exit planning with their key advisors, I’ve listed a few steps to get the discussion started.
1. Identify your goals: What is most important to you? The total value that you receive for the business after tax, the timing of your exit, the type of owners who take over, the importance of a continuing legacy of success for the business, the future of your employees – any or all of these considerations may be critically important to you.
2. Picture your business prospering without you: If your business cannot prosper without your direct involvement, then you will have few options for an exit. Ask yourself this: “How can I develop my business into a self-propelled company?” The more easily a new owner-operator can understand and take over the reins of your company, the greater likelihood that you can achieve a satisfactory exit. So you may want to start by asking yourself this next question: If I were out of contact with my company for the next three months, who would do all the things that I do?
3. Begin developing your self-propelled company: Many business owners don’t start preparing their business for sale until they are ready to exit, only to find that they need a great deal of time to prepare the company for a satisfactory result. The time to start improving the value and marketability of your company is right now, before you start focusing on preparing for the sale. Perhaps you already have good financial reporting system, and manage to an operating budget. If not, this is a fundamental need to fill, especially before taking a company to market. But you also need to establish longer term goals and a financial forecast – five years is a good benchmark, even if you want to sell sooner. The goals will be the basis for establishing formal roles, responsibilities and accountability within your management team. The marketing plan to achieve your growth will be a good way to identify the business’s potential. And by updating the plan over time, you can refine the assumptions and increasingly involve your employees in the drive for growth – a critical factor in motivating them and increasing their sense of ownership.

If you would like to learn more about the process of developing an exit strategy, implementing your exit plan, and managing due diligence, please contact me at RobertBurger@b2bcfo.com. I will be glad to discuss any aspect of your business and to provide you with a copy of The Exit Strategy Handbook, an exclusive publication of B2B CFO® written by founder Jerry Mills.

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