Preparation for Sale

Preparation for Selling Your Business is the Key in
Maximizing  the Sales Value.

Currently in U.S., 80% of business owners of small  and  middle  market companies who put their businesses up for sale never close the transaction. The reasons: (1) poor preparation and, (2) over valuation.

With the economic recession in Brazil, more businesses are going for sale than at any other point in history creating a buyer’s market. This buyers’ market  will  cause  some  downward pressures. Business  owners  who  do not prepare well or over value their companies will be left out in the cold.

Many strategic and financial buyers  with significant funds to invest are  more  cautious  and reluctant to pay premiums for companies than a few  years  ago. Owners should  take these three steps to significantly  increase  their  chances of selling their businesses on favorable terms.
 

• Think like a “buyer.”
• Prepare before you go after a buyer
• Select the right deal team

Build your business to last decades, but be prepared to sell it tomorrow

It is often useful to start  planning  for  an  exit  in  the  early  stages  of  the  company’s  life. Whether the aim is to have an IPO, to quickly get acquired by strategic or financial investor, or to pass on the  family business to children, early planning will help owners structure their business towards their desired outcome.

Your exit strategy can influence many aspects of your business such as its  legal  structure, the types of revenue models you should adopt, the trade-offs between investing for long vs short-term growth, the types of investors you should  seek,  etc. Even  if  you  exit business because of burnout, business  failure or  boredom with your company, it still pays to plan in advance for the  exit. By  thinking rationally  about  various  exit  strategy  from  the  outset, shareholders can maximise their take home return on their investment and sweat equity.

Exiting  might not be your short-term goal, but think what it would  mean to have a well-oiled machine in operation at all times. A  business that provides you with  options that  will maximize  your  wealth  as well  as your peace of mind. Chances are, that  your  business will represent  your  largest  asset  upon retirement.

If you’re an owner who’s focused on building the value of this asset, whether that is to drive its economic performance, create  a legacy that can be transitioned  from generation to the next or to sell to a strategic buyer, then let us  help you  understand what  your  business is really worth and the drivers that will net you the greatest return.

Preparing your Business for Sale

If you start today, it will take you one to three years to sell your business and be completely out. If you plan to retire in the next five years, you should start preparing your  business for a sale today. Preparing your business for sale involves  two  main components - maximizing the value and minimizing obstacles to getting a deal done. There are a million things  that a potential buyer looks for in a potential acquisition target. We have helped  prepare  dozens of  businesses for sale and have a very good idea what buyers are looking for.

If you are a business owner, you’ve likely found yourself asking:
 

• Am I ready to sell?
• How much is my business worth?
• How do I prepare my business for a transition?

Each of these questions has likely been met with some  uncertainty. The fact is, decision to sell  your  business  is  always  complex, as it’s often not  only  a financial  decision, but  an emotional one as well.

If you’re dreaming of that golden retirement, or simply hoping to rake in  that extra cash, we recommend you keep attention to preparation.

Get a Business Valuation

This will give you a realistic idea of what your business is worth from  an  objective, outside source. By having accurate  expectations, you  will be  able to  properly  prepare  for  your retirement or exit plan. It will also help  you  prepare for future buyer negotiations, and help you understand the value gaps within your business.

Prepare to sell your business like you would sell your home

As a home owner, you  probably  wouldn't  invite a potential buyer inside unless the  house was  clean  and  organized. You  would  also spend  some  time  and money  making a few upgrades  on  the  house  before  putting  it  up  for  sale. Similarly,  you  should  make the appropriate changes to your business  ahead  of  time  before  putting  it  up  for  sale. This means  getting  your  books  in  order, cleaning up  your financials, organizing  your  legal paperwork, etc. This  will  allow you to  make  a  lasting  first  impression  on  your potential buyers and avoid any major headaches at the time of the sale.

Consult with a Financial Advisor

The advisor will go over all of the factors that will boost  the  valuation of your business and make it more sustainable in order  to  avoid  any major  blow-ups  during  the  time of  your potential departure. Examples of these factors include:
 

• Customer Concentration
• Strength of Management Team
• Scale of Business: Revenues/EBITDA
• Profit and Growth Margins
• Quality of Financial Reporting and Systems
• Sustainable Competitive Advantages
• Market Size and Characteristics
• Recurring Revenues/Long-term Contracts

The advisor  will  walk you  through the  entire  process, and  help  you  best  position  your company to get the most value in the marketplace.

It’s hard to sell  a  business, and it’s even  harder to sell it  at  your desired  price. With  the proper  preparation  and team in place, you’ll be able to take on the  marketplace  and  get that price point you deserve.

Contact  Solver Corporate to help your company confidentially explore Preparation for Sale Solutions.