InSight

Exit and Growth Strategies for Middle Market Businesses

Prepare in Advance To Sell Your Business

By Eduardo Berdegué | Aug 12, 2011

Seek professional advice to gain maximum value before selling your business.

As a good friend was getting ready to sell her home, she was advised to contact a Stager for assistance.  A Stager, I then learned, is someone with a good eye for home decorating and, especially, a good sense for homebuyer’s psychology, that helps preparing a house for sale.  Following her Stager’s advice, my friend bougPeople with Coffeeht some decorating accents, fixed minor defects such as leaking hoses, stained walls, and even changed the brand of light bulbs.  Always following the expert’s instructions, furniture was rearranged to increase flow and some pieces were simply removed to create a sensation of brighter and larger spaces.  So, a couple of weekends and less than a couple of thousand dollars later the house had effectively increased its appeal and soon afterwards it was sold!

If only preparing a business for sale were as simple…!

Over the next decade, an increasing number of sellers will compete for a set number of ever more sophisticated and opportunistic buyers.  Those business owners who sought professional advice in advance and prepared their businesses, and themselves, for the largest transaction of their lives, will be handsomely rewarded both financially and emotionally.

The process of preparing a business for sale may vary as it may be short or lengthy, straightforward or complex, and it may or may not involve the participation of a CPA, wealth manager, estate, corporate, and tax attorney, insurance agent, and other trusted advisors.  What does remain a constant, however, is that at the center of this effort there should be an experienced and resourceful investment banker.

As a business owner considering the sale of all, or part, of your company, you need to know what the value of the company is.  You want to understand how that value was determined and how the business’ recent performance, assets, history, and/or outlook were weighted in determining that value.  Should it be advisable to modify operational, financial, or other aspects of the business to enhance its value, you should be willing to at least consider implementing the recommendations.  It will be important to match the expected wealth that will be generated with the sale, to the targeted wealth required to accomplish all your retirement and legacy goals. You want a realistic assessment of the marketability of your business and the characteristics of the likely pool, or pools, of prospective buyers.  It will be critical for you to understand the implications on your personal finances of the different options available to structure a transaction; and a long etcetera of important issues that are part of the preparation stage.

Clearly, this takes more than just a couple of weekends’ worth of planning.  Moreover, today’s buyers, can easily tell the difference between a “STAGED” and a SOLID business opportunity. Much like you could.

Posted by Eduardo Berdegué.

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