Thursday, 24 March 2016 12:35

Selling a Business..... Basic for Success

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My associates and I are often quizzed about the process of selling a business. It’s something that many people only do once in their life and its common for business owners to tell us that they really didn’t plan much for the eventual sale of their business. In fact, a common question of us is “is my business saleable?” So, much of what we do at Marathon is to educate business owners and often their accountants, attorneys and others about the sale process. And the earlier the education process begins, the better for the business owner in terms of the success that he or she will likely experience when it is time to sell the business.
There’s much more to it than this space will allow, but following are a few thoughts about the factors that are considered by buyers of businesses that determine salability, price and transaction terms. The concepts that follow are relevant here because they are all factors that can be influenced or controlled by a business owner leading up to a sale event. Some factors such as the weather, the economy, government regulations, etc. are generally not within a business owners’ direct control but many factors as follows, are within a business owners control... and hence a business owner can have some control over the sale success for his or her business.
Here goes...
1. Cash Flow is the major value driver. Stable and increasing cash flow to cover debt service, owner compensation, future investment in the business, etc. matters most.
2. Business reputation is important. Buyers of business usually want to benefit from the success of a business built on its good reputation for customer service, product quality, fair prices, etc. rather than having to fix a poor reputation.
3. Good financial records is a big plus whereas sloppy, inaccurate or outdated financials is a red flag
4. Documented policies and procedures adds value and increase salability. The easier it will be for a new owner to learn how the business operates and to transfer knowledge from the seller to the new owner, the more attractive the business is to buyers.
5. Trends really matter. A business with declining or very volatile sales, profit and cash can expect a significant price discount vs a similar business with stable or increasing sales, profits and cash flow
6. Size matters. Generally larger businesses command higher relative valuations and are more salable than small businesses regardless of profitability. Being a very small business can be quite rewarding and pleasant while operating the business, but when selling a business, increasing size will increase the salability and relative price to a smaller business.
There are many other concepts and ideas that we share with our clients in planning for a business sale.
These six are among the most basic. Selling a business is not a one size fits all nor cookie cutter process. Businesses can get ready to sell the same as one gets a home ready to sell. There are substantive ways to shine up a business so that is sparkles in the eyes of buyers which leads to increased salability at a good price and on excellent deal terms for the selling business owner. For a confidential, no obligation discussion about the possible sale of your business, please call me at 610-898-8086 X22 or on my mobile at 484-797-9796. This email address is being protected from spambots. You need JavaScript enabled to view it. to email me.

Last modified on Thursday, 24 March 2016 12:57
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