Exit and Growth Strategies for Middle Market Businesses

5 Ways to Maximize the Proceeds From the Sale of Your Business | Part 4

By Brian Ballo | Mar 20, 2014

Nest EggThis Blog Post is the fourth 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:

4.  Strengthen the Management Team and Operational Systems

Financial buyers look to “partner” with a strong and experienced executive management team. With a part of the purchase price typically structured as an earn-out, key owners are expected to transition to key employees, and continue to hit projected earnings estimates.

If you, as an owner, will be exiting, then stabilize buyer comfort that the company’s earnings trend will continue, by making it easy for a buyer to step into your role. If you make most of the key decisions, and have the primary relationships with key customers and vendors, your company will be seen as a risky investment.  You can mitigate this risk by identifying a replacement, someone who plans to remain with the company post sale, such that you can leave, or to move to a less demanding new position.

Part of improving housekeeping should also focus on systems and procedures, particularly, the information technology network.  Excuses about having outdated technology and processes, will negatively impact value. A good IT system will create the impression that the company is poised to move into the future. The procedures manuals should be updated, so the buyer is able to operate the business without you.

Posted by Brian Ballo.

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