by Dave Driscoll, Business Broker and President
Do you want to sell your business soon? Will you NEED to sell your business soon?
The answer to either question can change more quickly than we’d like to think.
So just in case, always run your business to sell!
Preparing your business to sell is not an easy task, even in the best of circumstances. You can preserve (or even build) business value by making a few manageable tasks the norm in your daily business operations NOW. Then, you’ll be ready for anything!
1. Maintain excellent corporate hygiene.
This is THE most important thing you can do as a business owner. Unfortunately, I’ve met far too many owners who neglect this opportunity to build business value both now and when it’s time to sell your business.
Corporate hygiene has three main components:
- Clean, accurate financials that tell the true story of the business.
- Documented processes and procedures that define the “how to” of your operations.
- Well-defined Human Resources policies and management- Company Handbook.
Don’t take shortcuts on maintaining accurate, current financials! Regardless of whether or not you plan to sell your business anytime soon, you need to assess your company’s financials at least quarterly to look for opportunities and minimize any problems. Updated balance sheets and profit and loss statements are crucial to running a healthy business at every stage in the business life cycle. Structure your statements in a meaningful way to help you and your managers run the business by your numbers.
2. Delegate, delegate, delegate.
Is your business able to run smoothly on a daily basis without your input? If not, you need to make your business less owner dependent. Invest in developing your employees’ skills and leadership potential. In the short term, delegating management responsibilities allows you to focus on growth strategy instead of putting out fires. In the long term, your business has no value to a potential buyer if it can’t run without you. The more you delegate, the higher the value of your business.
3. Prepare yourself emotionally.
Your business is your baby and you’ve committed your time and energy wholeheartedly since the beginning. But, you need balance; your life should not revolve entirely around your business. Explore new or neglected hobbies and passions, find volunteer opportunities that reflect your personal values, and connect with a peer network outside of your work life. Your life will be richer and the fresh perspectives you gain will benefit you, your family, and your business. Nurturing your identity beyond that of “business owner” will ensure that if/when you eventually do sell your business, you’ll be emotionally prepared and ready to fill your days with personally meaningful pursuits. There are professional industrial psychologists who can help with this – don’t hesitate to benefit from their expert services.
There are professional industrial consultants who can help you tap into your other talents – don’t hesitate to benefit from their expert services.
4. Know your industry.
Be aware of the trends in your industry, as well as changes in technology and society that will impact the need for your products or services. For example, I owned a company that manufactured envelopes…and then everyone started paying bills online and sending emails instead of snail mail. The market for envelopes plummeted. Keep a watchful eye to the future and follow your instincts. Don’t wait until you no longer have a business to sell.
Some business owners believe they will never want to sell their businesses.
That’s a noble goal, but you still need a contingency plan. Over time, or sometimes abruptly, owners can reach a point of professional burn out – this is not healthy for the owner or the business. Sadly, by the time an owner realizes his/her heart is no longer in the game, the business value is usually already suffering.
Even if you do continue working and “die with your boots on,” I assume you’d like your business to continue after your death. At the very least, you probably want your family to have the option of selling your business and benefitting from its monetary value. However, if you have failed to run your business in anticipation of an eventual sale, the monetary value to your loved ones will be severely impacted.
What no one wants to talk about…
Our health, and that of our family, is only minimally within our control. Sadly, many businesses are simply closed because the owner (or a close family member) faces a devastating health diagnosis – even if the ultimate outcome is good, that scare can be enough to cause the owner to reexamine priorities and decide to sell the business. None of us can predict the future, so be prepared for the worst and hope for the best.
Don’t wait until your business is in a downturn.
Experts suggest that the best time to sell a business is half- to two-thirds of the way up in the business cycle. The temptation is always to continue riding the wave in the good times, but that’s also when your business is also most valuable to a buyer. Think of it this way… give the buyer the opportunity to make money in the current business cycle. Very few buyers are willing to assume the risk of a business that is in decline.
So run your business as if you were going to sell it tomorrow.
Take care of those improvements you have been putting off.
Upgrade your systems.
Keep meticulous financial records following accepted accounting principles.
Strengthen your workforce.
Most business owners wait too long for the “perfect time” to sell the business and then aren’t ready when the need or opportunity arises. Trust me, you will never regret the effort you put into being prepared.
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314) 303-5600. www.MetroBusinessAdvisors.com
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