WCI Brokers is the largest full-service business brokerage firm in Northern Arizona. As business intermediaries, we have facilitated more than 500 business acquisitions in Northern Arizona over the past 15 years. This article is part of a series of articles written by our professionals at WCI Brokers on topics important to business owners interested in selling their businesses.
A couple of statistics are noteworthy. Did you know that only 8,000 small and mid-sized companies are sold every year? Yet, so-called “boomers,” born between 1946 and 1964 own five to six million businesses and by 2018, they will be reaching the age of 65 at a rate of 8,000 a day. Many of them will be looking to sell their businesses. Based on these statistics, there is likely to be a substantial increase in the inventory of businesses for sale in the next five to 10 years.
Currently, it’s a seller’s market where well-prepared business opportunities attract many qualified buyers and are sold quickly at good prices and favorable terms. Our objective is to have a seamless and profitable sale for the seller in the shortest amount of time, so preparing your business for sale when the opportunity presents itself is imperative.
Regardless of market conditions for business sales, business owners still need to properly prepare themselves and their businesses by doing the following:
Create a Plan Now
The transition out of your business is best achieved by having a plan in place for your family’s and your future. This might include restructuring internal management, streamlining business operations, developing a tax and estate plan and clarifying personal goals and desires for what you want to do next. For most business owners, their business is one of their most valuable assets. Leaving or selling your business without proper planning in some cases can mean throwing away significant value that you’ve worked hard to create.
Value Your Company
The true value of your company is the price a buyer will pay for it given all the facts. Valuations and appraisals by experienced professionals will tell you the relative worth of your company at any one point in time, but they don’t tell you what you need to do to increase the value of your business for sale in the future. Your accountant, business consultant or business broker or intermediary can help you identify those factors that increase value and correct those that don’t.
Know the Best Time to Sell
Companies are bought, not sold. Buyers decide to make an offer when they are ready and conditions are favorable, not when the seller is thinking about selling. Many times, business owners initiate the marketing process after the growth curve has flattened or some other event has compromised future business performance. A business intermediary will be hard-pressed to sell the business if buyers perceive the business is in distress. The best time to sell is when business conditions (growth, profitability, intrinsic value) are improving or at their peak.
Do Due Diligence on Your Business
You can dramatically increase the likelihood of completing a transaction if you anticipate what any reasonable buyer would want to know about your business and its operations before you put your business on the market. The question every seller should ask him/herself is, “Would I buy my business based on the condition of my financial and operational information?” More deals fail due to poor financial documentation than any other single reason.
Deal with the Issues
All businesses have issues – some more serious than others. Proper preparation means having all the facts associated with the issue ready to disclose and discuss with a potential buyer. That also means having a plan to deal with those issues if they haven’t been resolved or having documentation that shows how those issues have been rectified. The more transparent the seller can make the due diligence process for the buyer, the more likely the deal will close under the most favorable terms and conditions for the seller.
Assemble a Team
Create a team of key individuals early on to help you achieve your goals and objectives for the transition. Whether you are a small mom and pop business or a much larger company, selling your business could be the most important financial decision you’ll ever make. Include on your team family members where appropriate and trusted advisers (business consultant, accountant, attorney, financial planner) to help you structure the transaction. Employ an expert business intermediary in your geographic area to represent your interests and get you the best possible deal. QCBN
By Peggy Marsh
Peggy Marsh is one of four professional business intermediaries with WCI Brokers. She has been helping buyers fulfill their dreams of owning a business and assisting sellers with preparing, marketing and transferring their business for seven years. To contact Peggy, call 928-699-1350 or email firstname.lastname@example.org.
Or for more information and a free confidential interview, call WCI Brokers at 928-445-1144. Learn more about us on our website at wcibusinessbrokers.com.