Most often, people who own a business, wait until when they are about to sell their business for them to begin planning for an exit. Planning is something that most business owners take for granted is the most vital thing in any successful business. Most of the problems that most business people have in their work is due to lack of information on the kind of business they are in. In this article, we will discuss some important things to prep your business for sale.
Incentivize your main employees
Before putting your business on the market, it is highly recommended to plan for the exit beforehand. Make sure that you have kept your key managers in the loop before selling your business. These are the managers that will likely stay with the business once it’s sold. Failure to do this can lead to conflict issues later on.
It is good to make sure that despite the fact that you are selling your business, your house is in order. The best way to prepare for change is to expect it, therefore, sell your business to an interested party when it is in total order. Also see: exit plan consultants
Establish Good and Strong Advisor Relationships Early
Before selling your business, create a good relationship with highly experienced lawyers and investment bankers. These need to be people who have the relevant M&A experience. Establishment of these kinds of relationships should be made earlier on before you sell your business. They need to take you through systematically on how the process is done. Make sure that the kind of advisor relationship you create on these matters is not family based. Family-based advisor support is known to lag down the whole process in one way or another.
Cut down Company Expenses
Who doesn’t what to buy a business that has high profits? A company that has high profits is attractive to the eye of the person who is interested in buying the business. Therefore, to increase your chances of selling your business to prospective clients, make sure that you have cut down some of the expenses in your firm that are not critical to the operation of your business. The process of cutting down expenses should begin around one to two years before selling your business. In doing so, you may lose a few tax write-offs; however, compensation will come when you sell your business.
Get Your Financial Numbers In Good Shape.
The financial statements of the company determine the value of any company. A company that you wish to sell needs to have good financial statements. Many businesses, however, have financial statements that are not pleasing to look at. These factors make the business look less credible to potential buyers, and few investors would wish to buy the company. If you happen to have a company where the revenue is less than $5 million, then make sure that you audit the financial statements of the last two years. A smaller company needs to be audited by a well-known, reputable accounting firm. The process of auditing can also help you find some weaknesses you never knew of in your financial operations. This process will give your time to correct whatever gaps you may be facing before selling the business altogether.
Establish a Growth Plan for Your Business
Most buyers will want to buy a business which has good opportunities in the days ahead. Despite the fact that you want to exit your business, make sure that you have established a plan that creates a good chance to whoever will buy the business. Most buyers are not interested in buying a business whose growth rate is declining. At the least, make sure that the last three years before your exit have a meaningful growth rate in order to make your business attractive to prospective buyers.