According to a recent study by business-for-sale marketplace BizBuySell, the sales of small businesses grew by nearly 50% in 2013. Specifically, there was an increase of 2,200-plus small business transactions, which were led by the sales of restaurants and retail stores.
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The impetus of this growth was the improving economy, which increased buyer confidence and allowed them to be financially able. Considering the spike, now is a great time to consider selling your business.
If selling your business isn’t in your deck of cards at the moment, it is still imperative to keep the end in mind, as the business should be able to survive and thrive with or without the day-to-day dependency on the business owner. Putting the necessary systems in place now will ensure the most successful outcome in the future.
Know when to start planning your exit
The worst thing you can do is wait until you need to exit the business due to health or financial reasons. There are many stressors involved in selling a business and the steps to make your company an appealing purchase need to be in place long before putting it on the market.
Generally, you should start preparing a business for sale at least 2-3 years before you want to exit. This will ensure that your business is prepared, so that by the time you are ready to exit, you can get the most value out of it. For instance, providing well-documented and audited financial statements, as well as the last three years of tax returns, will instill confidence for the buyers. This makes the business easier to sell and will garner a higher price.
Start with the end in mind
Having a key brand differentiator associated with your business and high customer satisfaction will increase its value and make it easier to sell. Considering different elements of your business, and evaluating your overall goals for the company will force you to be disciplined, systematic and strategic in decision making.
Also, if the success of your business is directly tied with your personal knowledge of the product or service, it is essential to include that knowledge in any operations and training manuals, apprenticeship plans, organizational planners, etc. This will make it easier to get a future buyer to purchase the company.
Consider all the elements that can impact the value of your business
There are a number of questions you should consider in order to determine when to put your business on the market and how to ensure a smooth transition. Being mindful of your responses to the following questions will help you begin planning your exit strategy:
- Are there any barriers that would prevent a sale?
- Would you consider alternatives to a complete sale, such as an employee stock ownership plan or a percentage sale?
- What do you need to obtain from the sale of the business in order to achieve your retirement goals?
- After the sale, will you step aside or stay on in a transitional role?
- If you stay on for a period of time to ensure a smooth transition, will you be a silent resource that can be called upon if needed or have a consultative, yet reduced role, which provides a monthly stipend?
- Should you be grooming a key replacement or second in command to stay in the business?
Build an exit team
Don’t try to sell your business on your own. Seeking professional help through a coaching, consulting, or advising firm can provide guidance throughout the process, as well as outside insight on things you may not have considered. Having a trusted advisor on your exit team, along with your accountant, attorney, and a business broker will be critical to properly valuing your business, negotiating the best deal, and maximizing proceeds from the sale.
Paul Segreto is the CEO of AdviCoach, a national company specializing in business coaching and advisory services customized for small- to mid-size businesses.