When planning to sell your business, it’s essential to do just that – plan! The sale of your business is likely to be the largest and most complex financial transaction of your lifetime. The foundation for a successful sale of your business is a plan or exit strategy. Without a plan and appropriate preparation for the sale, you’re unlikely to realize the maximum value of your business.
As with any good plan, the initial step in planning for an ultimate sale of your business is to outline some overall goals for selling your business, such as:
- An acceptable price range for the business.
- Potential time frame for the sale of the business – the more flexible the time, the better you can prepare your business for an ultimate sale.
- Willingness to finance a portion of the purchase price, and the acceptable time frame for seller financing term – requiring an all cash payoff will result in realizing a lower price (potentially a substantially lower price) for your business.
- Flexibility in staying involved with the business post-sale to assist in the transition and be available to assist the new owner – an unwillingness to stay involved after of the sale of the business could signal low confidence in the prospects of the business, lowering its attractiveness.
- To whom would you prefer to sell the business – family member, employees, partner, a competitor, or a third-party buyer? Do you want to maintain an on-going partial ownership?
With the ultimate goal of maximizing the selling price of your business, the ability to be flexible with respect to the timing and terms of the sale will allow you to realize the full value of the business.
Even if you don’t plan to sell your business in the near future, it’s still important to develop an exit strategy as several situations could cause you to want to sell your business, and not necessarily at an ideal time:
- Illness or death of a principal
- Partnership dispute
- Diminished interest in the business due to boredom, frustration or burnout
- Business growth beyond capacity to fund or manage
Without an exit strategy and proper preparation of your business, should a sudden need to sell your business arise, you may realize significantly less than full value for your business. Having a plan in place for an eventual exit from your business will better prepare you, regardless of the timing or circumstances.
Whatever the reasons for wanting to sell your business, your business will be prepared by going through the “Critical Steps for Preparing to Sell Your Business” (see previous article). This process will help create a focused approach to the sale of your business and produce the appropriate expectations for its ultimate sale.
Suncoast CFO Solutions can assist businesses in developing exit strategies and preparing for sale of the business. Contact us for a free consultation.