Company Selling Prep within "3-5 Years"

1. Is your business less enjoyable now than it used to be?
2. Has your business become more challenging to manage or to keep going?
3. Has your business taken you away from your family and other personal commitments?
4. Do you lack the drive to move your business to the next level in order to stay competitive?
   

• strengthening your markets
• cleaning up the financials
• streamlining operations
  

  all of which will be reviewed in this guide.

Cycle 1: Introduction or Emerging Market
This is when a business first comes into the market. The market if fairly new and is not fully developed or serviced.

Cycle 2: Growth
This is the period when the business begins experiencing rapid growth. The business will expand its operations, hire new people, and possibly move into new markets and territories.

Cycle 3: Maturity
This is when the business begins to mature. Competitors are entering the market to challenge the leader. To remain competitive, the business must tighten its operations, increase productivity, and shed unprofitable operations.

Cycle 4: Decline
This is when the business begins to decline due to competitive pressures from more capital-intensive competitors or when markets change.

• Plan your exit timing
  If retirement is your exit strategy, plan to sell well in advance of your retirement age. Buyers will sense your need to retire and may negotiate a lower sales price.
  
  
• Don't leave too late
  Burnout, boredom or just ready to throw in the towel may begin to show up in your financials. Any decline in your financials will lower the value of your goodwill and company value.
  
  
• Watch your markets
  A bad time to sell is when a nationally-branded competitor enters your market.
  
  
• Watch the economy
  Selling in a growing economy brings a higher price than selling in a recession. The best thing to do during a recession or economic slowdown is prep your company to achieve maximum value when the economy turns around.
  

• Corporate downsizing has brought into the market business managers who are looking for new opportunities. These qualified managers see themselves buying and managing an established small business close to home.
  
  
• Most of these individuals do not the have the financial means to purchase a business outright. They will likely seek financing through a SBA loan or in some cases, seller financing.
  
  
• These buyers often request a transition period where the seller will be engaged for up to a year helping the buyer assume the full transfer of the business. The seller is usually paid a fee for these services.

• The competition may buy your business especially if you have a market niche or product-line that they want.
  
  
• Sometimes it is financially feasible to buy an existing operation than to take the time and expense to build one up.
  
  
• Buying you out will depend on the strength of your market position. The stronger the market position, the more likely the buyout.
  
  
• The competition can secure the financing to buy you out. They may engage your services for a period to ensure your customers remain loyal to them.

• Sometimes an established business in your related field is looking to expand their operations or to move into a new product line or service.
  
  
• It may be a lot cheaper to buy an established operation instead of setting up their own operations in a new market.
  
  
• These buyers generally have the financing to make a out-right purchase. They will likely request management to stay on for the immediate period.

• You may find an investment group looking for investment opportunities. These investment teams will buy companies to divest or merge with similar businesses.
  
  
• They will scrutinize a company very carefully. They buy companies that are in growing markets, have good financials, maintain key management, and meet their investment objectives. They will pay top dollar for a company if these basic elements are in-place.
  
  
• Investment Groups generally request that management remain in-place for the immediate period. In some cases, they will bring in their own management team.
  

• The ultimate customer is the person who buys you out. Keep that person in mind when preparing your business to sell.
  
  
• Imagine yourself as the buyer. What would you require of a business? What kind of markets would you like to see? How should the financials look like? Prepare your business with your objectives in mind.

• Your business will be more valuable if it is NOT dependent on you. The ideal business is when you can take an extended vacation and everything will operate independently of you being there.
  
  

  You need to carve yourself out of the picture by:
  
  

  1. sharing your expertise and contacts with key employees
  2. bringing key employees to the front of the line to assume responsibility — you begin to move to the back of the line
  3. assigning key relationships with employees so that the customer feels comfortable not having you in the picture.
     

• The less your business is dependent on key labor, the more valuable the business.
  
  
• The ideal business is when the buyer can take over a turn-key operation. The objective is to automate procedures and operations so that a system can be replicated and implemented by any person.

• Successful business owners who sell their businesses have a complete picture of what their business will look like when it is finished.
  
  They know what products will be available, what markets will be opened, and what operations will be achieved.

• As you prepare your business to sell, continue to deliver exceptional value to your customers. In addition to the quality of your value, focus on your quantity.
  
  
• A valuable business is one that delivers both quality and quantity. In other words, you want to deliver enormous value to a huge number of customers.
  
  

• Avoid upsetting your employees
  Any rumors of a sale can be unsettling for any staff. Your employees want job security. Rumors of a pending sale may prompt employees to seek other employment.
  
  Some tips:
  
  
  • meet with your staff frequently to update them on business plans
    
    
  • speak privately with key individuals about your plans and assure them of continued success
    
    
  • consider some pay raises, promotions, company picnics, etc., to maintain morale.
    
    
• Keep the Competition at Bay
  Once your competitor finds out that you are for sale, they might undertake some moves that can undermine your customers, suppliers, and creditors.
  
  Rumors that "you will no longer be in the business" could damage the goodwill that you have developed over the years.
  
  Some tips:
  
  
  • touch base with your key customers — assure them of your continued service and business
    
    
  • keep up good relationships with your suppliers and creditors
    
    
  • pay your accounts on time

Move Quickly
Once you make the decision to sell, jump into it quickly. The longer it takes to sell, the higher chance your employees, competitors, creditors, etc., may undermine your continued operations.

• Have your financials ready for review.
• Scrutinize and validate every potential buyer prior to showing them your sales sheet.
• Make yourself available as needed.
• Seek professional assistance from an advisor who can prepare the necessary documentation and keep things confidential and moving.