04 Apr Thinking of Selling? What Do You Need to Do? The Top 14 Factors…
You have heard from every news report, every professional and every article, information about the overwhelming number of baby boomer business owners who will retire in the next decade. The untold advantage you have is the increased amount of capital available in the marketplace (private equity, family offices, individual investors, strategic and synergistic company needs). All of these players on the buy side of the business for sale marketplace are competing for your company. However, the exit and sale process leading to a liquidity event is sometimes elusive, complex, confusing and requires professional guidance to achieve the best result and maximize enterprise value. Here are 14 factors to consider in positioning your company to achieve the best outcome and how to attract the greatest degree of interest:
- Plan, Plan, Plan-some call it an exit plan, a strategic plan, a succession plan – a plan which addresses the direction your company will take to achieve maximum value. The old cliché lets you know that if you fail to plan then you plan to fail. As mundane as it sounds, it is true without exception.
- Selfish or smart? Know your personal needs to sustain the lifestyle to which you have become accustomed. If you are the key rainmaker in the company, your needs are paramount in the decision process.
- Solidify your management team, have an organization chart, get the key players on track with your plans. Although plans are confidential, your most critical executives and managers are important to proving the value of your company.
- Improve the financial condition of your business – Clean up the balance sheet, avoid or eliminate the non-business or unnecessary expenses from the income statement. If you are inventory heavy make sure it is reasonable with respect to your sales and your sales cycle. Shed excess staff.
- Consider the need for audited financial statements. It can be a significant cost but can be a key metric in obtaining the best possible liquidity value.
- Consider a formal valuation. Another unexpected cost but it may be required by the buyer, the financing source of the transaction or your partners, if any exist.
- Clean house. Human resources issues need to be resolved with a clear direction, major capital expenditures need to be addressed and a clear organizational structure needs to be identified and committed to writing.
- Get ready for due diligence? Consider due diligence as you would any audit.
- Select your advisors. Consult with them and coordinate how you will execute the plan you devised in step 1. These advisors include but are not limited to your CPA, attorney (business attorney, real estate attorney, and tax attorney), your financial planner or wealth manager, your business intermediary, investment banker or business broker, your real estate broker and anyone else who would be a critical asset in the process.
- Expectations are important in the exit…your expectations, those of the buyer, those of your staff. Take a look at where you are and where you expect to be three years from today.
- Look at your company from the buyer’s perspective. Don’t compromise your value proposition rather be prepared with responses to any “warts” of your business. Also prepare to identify and monetize specific areas of expected growth.
- Anticipate a transition period of at least one year if you are selling to a financial or strategic buyer. If your company is the right fit for a Private Equity buyer, you will typically need to remain for a significantly longer period of time.
- Know that the entire process can be long, challenging and stressful. Have fun with it! Remember, the end result gives you an ability to cash in on the years you have faithfully invested in your company.
- Congratulate yourself!
Anthony J. Citrolo, CPA/CMAA is Managing Partner and founder of Strategic Merger & Acquisition Advisors, New York Business Brokerage, Inc. and NYBB Commercial Real Estate, Inc. Their capabilities professionally address privately held companies in the marketplace who need to consider a sale or who look to grow through acquisition. Offices are in Woodbury and Manhattan. Contact Anthony Citrolo at 1.866.449.6922 or firstname.lastname@example.org.