Exit and Growth Strategies for Middle Market Businesses

5 Ways to Maximize the Proceeds From the Sale of Your Business | Part 2

By Brian Ballo | Mar 12, 2014

Money GraphThis Blog Post is the second in a series of 5.

Naturally, business owners believe that their business can be sold at the higher end of the pricing range. However, an attractive Letter of Intent to Acquire typically does not come unsolicited. Therefore, to increase the odds of maximizing the proceeds from the methodical sale of your business, the following tactical steps can be taken:

2. Focus on Increasing EBITDA

If corporate and private equity group buyers are focused on EBITDA, then you should be also. Cash flow is king. That means, improving your income statement is the best way of maximizing the price at which the business sells.

Owners  who  have  structured   business  operations  to benefit themselves and their families, through above-market salaries or tax treatments, should prepare recasted financial statements  to exclude certain perks in order to present the company  as  a  profit-generating engine to potential new owners. Items such as personal expenses, charitable contributions, and significant non-recurring expenses can also be added back to earnings.

Real EBITDA can be bolstered by focusing on the business’ core competency, or the most profitable income streams, which is also more appealing to a buyer than a company going in many different directions at once. Obtain  profit and loss statements  by division, or by customer-type, then  address weaknesses,  before  such  risks  are  identified   by  potential buyers.

Buyers seek a return on investment, and pay a premium for a company with a healthy growth trend.  A strong brand, loyal customers, and competitive market positioning, are all attractive.  Mitigating risks such as customer concentration and product diversity will enhance value.

Posted by Brian Ballo.

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