O s
September – October, 2022 Volume 17 — Issue 97
There are major investment opportunities in many people’s lives. Big time purchases should always be considered from the investment side of their bank statements and ledger pages. Buying a home is a big one. Investment in property or real estate is another. Investing in art or precious metals are others. Starting and ending a business is yet one more big time investment. If you are at the end of the line with your company you need to be preparing to sell your small business. Getting the highest value takes preparation.
What do all of these major purchases/investments have in common? They likely will help increase your wealth level if you consult with professionals as part of your buying process. Maurer Consulting Group works with small businesses to help them develop and embrace strategies that set them on an upward trajectory.
Why You Might Decide to Sell Your Small Business
Let’s address the point at which selling a business becomes necessary. A lot of work goes into a small business that has value. After all the time invested over a long period of time, one would hope to be paid enough by a buyer to receive a positive investment for all the time and effort.
What would cause a business owner, or partners decide to sell their business? There are more reasons than you might think. For business owners who traded a paid job with someone else’s business for a business of their own, retirement with a nice cushion to spend during retirement usually tops the list. But, there are a lot of other reasons. Some of these definitely fall into the life we are all experiencing right now:
- Concern about the economy and how it affects sales and profits
- Sales have hit a plateau and no longer rise to higher levels
- Trying to deal with competition from around the world instead of your local area.
- Frustration with finding, recruiting and retaining high level employees
- Constant technological changes are hard to keep up with
- Changes in local, state and federal laws and regulations affecting your operations
- The business is no longer ‘fun’ or ‘exciting’ for you
- Too many twists and turns have become frustrating
- You suffer from ‘business burnout’ pretty regularly
- You want to retire and enjoy more time with family, friends, traveling and renewing your favorite hobbies
When You Decide to Sell, How You Can Get Started
When to start your business sale process
Depending on how well you organized and operated your company over the years, the amount of time required to get it ready for marketing can vary. But, the longer this plan has been in the back of your mind as a long term goal, the better off you should be.
Five or more years are not unreasonable lengths of time to position your firm to be sold. Here are some things you will want to work on to make your company appear to be a great one for someone else to purchase and run.
Think about a saleable company name
- Have you operated your firm as the owner/operator for a long time using your own name in the title? How attractive will your name on the signage be if you are no longer in charge or even involved? Remember, buyers want you to personally become redundant. Yes, they need you to become unnecessary and unneeded. This will become their business with no further input from ‘Suzy Q. Smith’ or ‘John Doe, Junior’.
- Take time to decide on a new, more ‘generic’ name, even if you continue using your name for a short time – maybe a year, for instance – along with the new, more generic name. If you are planning to move on, consider something like ‘Suzy Q. Smith Spectacular Software Design‘ or ‘John Doe Junior Interior Design Solutions‘. When you make the switch to just the new name without including your name, customers will have had some time to get used to the new name, logo, and other branding items.
Solid stakeholder issues will make your firm more valuable
- You set up and grew your own business, hiring the best employees you could find. And, selecting and working with business professionals for legal and financial advice. Consultants you used over the years helped you make your business successful and are key players in your game plan. Suppliers and vendors you set up accounts with and got to know on a personal basis also contributed to your firm’s success. And, so are your loyal customers.
- Take the time to touch base with all of those valuable contributors to see which will continue to deal with new ownership. Don’t forget how long it took you to set up all of those contacts while you moved your firm upward. It would likely take new owners as much time to rebuild all those connections. The more you can provide the buyer and ease his/her takeover of the firm, the more value you offer.
Make your financial picture as good as possible
Clear up anything in your finances that you have put off because you thought it was not important. Somehow we seem to find stupid reasons to put things on the back burner, assuming we will have years to remedy those issues.
- If there are customers behind in their payments, determine how you will deal with them. This can be done internally or outsourced. Make your books look as squeaky clean as you can. What you think are minor annoyances that don’t make much difference can appear to potential buyers like red flag issues. Their interpretation can be different from yours. Their view is finding one more thing they will have to waste time doing. It was your problem, so you should fix it. Don’t give potential buyers reasons to think you may be hiding something. Find one issue, is all it takes to cause them to start looking in all dark corners thinking your value should be lower.
Put your best face forward
- Make your business office, shop, store, warehouse – and even your website – look perfect, inside and outside. If you have let your business surroundings get a little worn out and tired, its time to fix them up. Remember, when you get ready to sell or trade in a car, you clean it up to make it look like almost brand new and worth a lot of money.
- Putting a house – or place of business – on the market? The first thing to do is start putting things in order and getting rid of clutter. Replace a light fixture, upgrade when necessary to eliminate out of date materials, fixtures or furniture. Or, add a coat of paint on walls in colors that you loved but might turn off buyers. If carpet is worn and dirty, consider some new flooring options.
- Buyers are already considering buying the property – mortgage, taxes and insurance. With a business sale, there are far more costs for them to consider. Buyers aren’t likely to want to spend thousand more to make your work space look decent and up to their standards.
Business Sales Can Be Complex
This sales process won’t be as basic as selling a sofa, a shovel or a yard of silk fabric. It won’t be as simple as getting a website or logo designed. Years of experience in our professional fields make things look simple to those who are inexperienced with business sales processes. Preparing to sell your small business is a whole other area of selling.
Don’t wait until the last minute to find a good broker/consultant to help you ready your business for sale. The issues mentioned above are not everything you will need to consider. The broker/consultant can provide you with other issues that may be important to your specific industry sector.
Last but not least…
Selling a business is not as simple as one might think. There are a lot of things to get sorted out and staged to be offered to those looking to buy a good business. Remember what your personal dreams were when you started your business. Buyers will have similar ones and will be looking for opportunities they can pretty much just step into and hit the ground running.
Maybe your reason for selling is for a planned retirement or an unexpected economic environment. And yes, a pandemic, could be a reason too. Whatever your reason, prepare to get the best price you can. If I can be of any assistance in your plans to take down your shingle and spend the coming years having fun, don’t be afraid to reach out.
