Each year, thousands of businesses change ownership. Yet, many owners don’t maximize the financial proceeds from this historic event. This event is a one-time opportunity to monetize the years invested in the business. One of the primary reasons why business owners don’t maximize financial proceeds is due to preparation. As such, prepare to sell today!
The process of transitioning a business requires knowledge and preparation. As such, a business owner can avoid costly mistakes by considering the following:
Prepare for the Transition:
An exit plan is an action strategy designed to maximize the value of the company. Business owners who define their exit goals and execute will be in a better position to control future transactions. Without an exit plan, there is a potential risk of being controlled by the transaction, reducing the final proceeds.
Know Business Value:
The value of your business is important for countless reasons. A valuation assists in identifying potential liquidity options and validating the objectives set forth in the exit plan. An understanding of the factors that increase or decrease value enables a business owner to operate the company with a focus on profitability. Lastly, business owners who know the Fair Market Value of their business are prepared to take advantage of unexpected opportunities and are better able to negotiate with potential acquirers.
Understand Potential Acquirers:
Most acquirers and investors have experience while sellers typically do not. The reason being, acquirers and investors understand the many facets of the merger and acquisition (M&A) process. As such, it is important to prepare the most appropriate documentation that not only captures the interest of a potential acquirer but also protects the company’s value.
Exit at the Right Time:
You’ve heard the saying that timing is everything. In the world of valuation, timing is a key element to maximize the value of a business. To produce optimal financial results, a business owner needs to be prepared, have the business ready, and a market with favorable conditions. Thus, exit plan objectives and the condition of the company should be assessed regularly against market cycles and other external factors.
Seek Professional Advice:
A successful M&A transaction requires experience in the many complexities of the process. There are professional M&A advisers who deal with this process every day. Engaging the right intermediary/broker will provide the appropriate expertise to guide, support, and benefit the transaction.
A business owner must be prepared with an exit plan, knowledge, valuation, and an experienced intermediary/broker. Being prepared will make the difference between a successful transaction and a missed opportunity for significant financial gain.
Prepare to sell your business today!