Impulse purchases rarely turn out to be a good thing, and the same goes for impulse sales. We are occasionally called upon to consult when a business owner has been approached by a buyer. They weren’t ready to sell, but someone came along and offered what seemed like a good price, so they agreed to sell and want to know what to do to close the deal.
If only they had come to us sooner. We could have prepared an exit plan that would have enhanced the value of the business to get them an even better price. We could have marketed the business to get multiple buyers involved to further drive up the price.
Each owner’s goals are different, and each needs a customized exit plan. But there are some common elements that should be in every plan to enhance a business so it’s ready for sale when the owner is ready. We advise clients to make small changes that will increase the value of the business before they go to market. We often advise and assist clients to:
- Remove owners’ vehicles and non-operating assets from the business, versus including them in the transaction without getting paid for them
- Capitalize assets on the balance sheet and expense them through accelerated depreciation
- Avoid minimizing earnings to minimize taxes.
- Develop contingency plans in case of unforeseen issues that could arise prior to a sale
- Diversify customer concentration
- Get customer contracts in place when appropriate and have the contract assignable to successors
- Make sure the business is not dependent on the owner or a few employees
- Identify and minimize or eliminate potential land mines
- Have employees sign confidentiality, non-compete and non-solicitation agreements
- Minimize working capital to convert it to cash
- Make sure inventory is fairly stated on the balance sheet
- Clean up financials and prepare them according to GAAP
- Prepare financials timely and on a monthly basis
- Clean up the physical space
A well-managed and executed exit plan will provide sellers with a positive outcome and greatly maximize ROI. It can be a complex process, but we can help identify and analyze all options and opportunities, maneuver the mazes of taxation financial planning and legal issues so sellers have the luxury of selling on their own terms. Have your business prepared to sell so if you elect to sell earlier than planned, you’ll get a much higher price and better terms.
For a confidential discussion about any aspect of selling a business, contact O&O at 913.648.0185 or email firstname.lastname@example.org.