Edit ModuleShow Tags

How to get what your business is worth


Published:

When you decide to sell your business to an outside party and you no longer want to manage your company, you naturally desire top dollar. Unless you are a gambler at heart, you want cash, not someone else's stock. If you accept stock, you are gambling on someone else's performance, market conditions, and a whole host of factors over which you have no control. You may also be tempted to continue working at the company to ensure maximum value for your stock.

To fully break away and achieve the best price, you must demonstrate to a buyer that your business can "stand alone" and thrive without you. Even if you think that you would be willing to be a part of the deal, you probably won't be happy being accountable to new owners when you are accustomed to calling the shots. Most buyers understand that it is very difficult for a business owner to remain involved with a company they have nurtured to success when they no longer own the business.

If a buyer knows that the existing owner and management team will not remain, they rarely pay top dollar for a business. If you don't come with the deal, you must ensure that the efficient and effective management team that helped the company succeed will stay in place after the sale. You can accomplish this by demonstrating that the existing management team has been golden handcuffed to the company and will stay regardless of who owns the company. This is why structured bonus plans are much more effective than arbitrary bonuses for retaining top management. For example, in a structured plan, half the bonus may be given up front and the other half over the next five years.

To get the best price, we suggest a controlled auction environment enabling you to negotiate with several qualified buyers at the same time. Your objective is to get the various buyers to compete against each other, thus driving the bidding for your business up and getting you top dollar. This works best for medium sized companies that are large enough to attract more than one buyer. Try to avoid selling your business through a negotiated sale with a buyer because in this scenario, the buyer controls the terms and the timing.

By following a few simple steps you can enhance the desirability of your business:

• Establish an excellent management team
• Adopt systematized business processes
• Create a diversified customer base
• Implement a realistic growth strategy
• Improve cash flow

It usually takes at least two to three years to prepare a business for a sale, so start now. Even if you have no immediate intention of selling your business, it is always best to be "buyer ready." You never know when the right buyer will surface.
{pagebreak:Page 1}

Edit Module
David Seems

David K. Seems, ChFC is a managing partner of Business Advisors LLC. Dave provides analysis and plan development for business owners to profitably exit their businesses. Dave, along with his strategic partners builds a comprehensive ownership transition plan that provides a blueprint for an owner’s successful exit and their company’s future. The most important aspect that makes Dave an industry leader is that he and his team have developed innovative strategies to address the unique issues faced by business owners operating in a volatile business climate. Contact him at 303-708-8774 or dseems@businessadvisorsllc.net.
 

Get more of our current issue | Subscribe to the magazine | Get our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

We need to call out power and greed

People spend more waking hours at work than in any other endeavor—and this gives us the opportunity to counteract much of the negativity that’s impacting our broader culture today.

Pueblo stakes its future on innovation

Pueblo became known as the Pittsburgh of the West, with affordable living, open space and parks. It was devastated by the 1982 steel crash and recession, but it's coming back stronger than ever.

Paving the way to private practice financing

One of the most challenging tasks in opening a practice is obtaining proper financing, but the below five key steps can help physicians secure a business loan and a beneficial banking relationship:
Edit ModuleShow Tags

Thanks for contributing to our community-- please keep your comments in good taste and appropriate for our business professional readers.

Add your comment: