Getting the top dollar for your business is something that you should start immediately if you want to sell within the next two to five years. In other words, it is never too early to start getting your business ready to sell; because you never know when an opportunity will present itself to make you a millionaire or multi-millionaire. On the flip side, a recent study from M & A Today magazine states that 65% of business owners don’t know what their business is worth, 85% have no exit strategy and 75% of their personal net worth is tied up in their business.
Tip 1. Have a plan. Determine a time line. Look at your age, your family and your bank account. How many years to you have before you want to simplify your life? What must you do between now and then? Start with the magic year and then work backwards until you get to the next 12 months. For example, you are 50 and you want to retire when you are 55 and you want $1 million in the bank with your house free and clear. You need $750,000 from your business to make it happen. What needs to happen in the next 12 months to make $750,000 a reality at sale time?
Tip 2. Maximize the value of your business starting today. Selling your business may be a big part of the financial side of your retirement strategy. You can do a lot to enhance the value of your business with 24 to 36 months prior to sale day. For example, if businesses in your industry sell for a multiple of 5 times cash flow and your company is currently generating $75,000 in annual cash flow ($40k in profit, $35k in interest, deprecation and amortization), the value of your company has a value of somewhere around $375,000. By increasing your pre-tax income an additional $75,000 to $115,000 per year your company will have a market value of $750,000 ($115,000 profit, $35,000 in interest, deprecation and amortization = $150,000 X 5 = $750.000).
Tip 3 Get help to guarantee cash flow growth. It is lonely at the top of any closely held business and here are only 24 hours in a day. Most business owners immediately enhance performance when they: a) have help drafting an overall plan to attain their long term goals, b) have assistance in evaluating what needs to be done monthly to make the program work, c) have assistance in establishing performance levels with accountability for the top two levels in the organization and d) have a defined monthly review and evaluation of performance on a consistent basis (minimum of monthly) and e) have a 24/7 resource to call when challenges occur.
Tip 4. Seek professional brokerage assistance. Although it is possible to sell your business without professional assistance, a do-it-yourself approach is one of the surest ways to leave money on the table. A seasoned business broker with a stellar reputation can help you establish a price, seek out qualified buyers, arrange financing and make sure the transaction is handled correctly and timely.
Tip 5. Be Patient. If you need a quick sale, there’s a good chance you won’t get top dollar for your business. It’s not unusual for a business to be on the market for months before the right buyer comes along.
