The Countdown To the Sale! Preparing For the Sale
(Free download at the end of the article)
In speaking with business owners their is one key insight I share. Incorporating business planning as a daily part of running the business. What do I mean by business planning? Focusing not only on the day to day operations of the business but also building a plan around maximizing the Enterprise Value of the business. It’s an area of focus that all owners should focus on regardless if they are thinking of selling the business or not. The one thing that has been consistent is that as an owner you never know when someone is going to knock on your door and ask if your business is for sale. I will say that when I speak to an owner that is emphatic about not selling the company, it is always interesting to see how that owner responds when a real potential buyer knocks. Being prepared for that scenario and others that may force the sale of your business is important. As an owner you may not have plans to sell your business but you should always have the business ready for a sale. So, how do you go about preparing your business?
Business Planning
Business Planning focuses on 11 Key Business Factors that can impact the the value of your business. The definition of value for this conversation is the Enterprise Value.
11 Business Factors:
- Years of Operation
- Management Strength
- Customer Loyalty
- Branding
- Customer Database
- IP & Technology
- Staff Contracts
- Location
- Owner Reliance
- Longevity
- Business Systems
The above graph shows an actual Business Plan Review conducted on an actual business owner with annual revenues north of $20 million. If the Enterprise Value of this business was maximized the Gantt Chart would be covered in light blue demonstrating a 90 -100% Score in each area. The four areas that are detracting from the value of this business are:
- Management Strength
- Staff Contracts
- Owner Reliance
- Business Systems
The Business Factors are only one third of the process. I also look at Forecast Factors for the business: Profits, Recurring Revenue, Revenue Streams and Revenue Potential. It is important to also look at the Market Factors as well: Economic Picture, Place within the market, Competitive Advantages, and the overall Market.
Based on feedback and insights from the business owner after several meetings I was able to create a customized action plan that addressed the four key detractors of his business. Below is the case study sharing how business planning worked for the owner and increased the purchase multiple for the business ” Getting Another Turn”!
CASE STUDY- Exit Planning_ Gaining Another Turn
Click on the link to listen to a brief WebEx on transition planning: Preparing The Business For Transition
The next article will be on personal planning. Are you as a business owner ready for the sale of your business and what it means to you after the sale? 80% of business owners that sale their business have buyers remorse within a year after the sale. We will cover the reasons behind their remorse and share how you can assist owners and prepare them for life after the transaction.
Start Your Transition With Exit Planning
Contact us to discuss your preparedness plan: [email protected]
212-621-3310
