Sunday, October 8, 2017

Is your Business Ready to Sell?

If you’re thinking about selling your business, think it through carefully. Selling should never be a spur of the moment decision. There are a number of factors to consider including if you should sell, when is the best time to sell, and what you need to consider before selling. Here are a few of the issues to help determine if it is the right time to sell:

1. Business readiness
Make sure you can produce two to three years of tax returns that are accurate and show maximum profitability to get the best price for your business.

2. Team approach
It's important for entrepreneurs to figure out whose services will be needed to help get the best price for their business. Do you need an accountant? How about an appraiser, attorney, consultant and business broker? The buyer is typically going to have a good team to go over your business, so you should, too.

3. Coping with Change
Rapidly changing technology, increasing globalization and other business trends can prove too much for some business owners. Keep your eyes trained three or four years down the road, and if you don’t believe you can keep up, sell before your failure to adapt catches up with you.

4. Diversification
Can the business thrive without the owner or without a key customer? If a buyer is concerned that a business is too dependent on the owner or a single customer, he may take his offer elsewhere. "A good business can operate when the owner is on vacation and has good revenue diversification, where no one customer represents more than five percent of the business.

5. Valuation
An incorrect valuation is often the main reason businesses don’t sell. If your price is too high, buyers don't take you seriously and won't bother to investigate further. If it is too low you will leave something on the table. Most sellers don't know the value of their business. Ask a broker, get a valuation. Ask an intermediary that is experienced in selling your type of business. Having a firm idea of what you would like to achieve is ideal but keep it within reason.

I hope these few thoughts help clarify some of the key factors that can help you maximize the potential return if you sell your business. Please let me know your thoughts.

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