By Gregg Kunz
You have built a solid company and are chugging along pretty nicely with no intentions of selling your business any time soon. But wait, will you feel the same way a few years out when you are ready to move on to something new or are approaching retirement age? Or worse, could you be faced with an illness or some other event which might force you to sell? A smart business strategy means having an exit plan in place long before you ever intend to sell.
So, what should you be doing NOW to ensure your business is well positioned for a successful sale five years down the road? Here are 5 insider tips:
- Get a Valuation. It is important that you have a realistic understanding of your business’ worth as it stands today. A professional price opinion by a seasoned business broker with knowledge of the current market and a baseline understanding of your business will help crystalize your current market position – and is a great starting point in strategizing where you want to be, or must be when you’re ready to sell in a few years. Having an objective assessment of your business’ worth, strengths and vulnerabilities is key to developing an effective action plan. Your plan may include changes and adjustments that you’ll want to make to your operations now to improve profitability and ensure the best sales outcome later. Even if you ultimately decide not to sell, enhanced operations always help your bottom line and enrich the value of your investments.
- Create a Growth Strategy. With your valuation complete, you are now better positioned to create a successful growth strategy for the coming years, which in turn will likely increase the value and salability of your business. Generally speaking, the four major strategies for growth are: Product Development, Market Development, Market Penetration, and Diversification. Regardless of your strategy, your approach to growth shouldn’t only consist of obvious things like operational, marketing and sales tactics, but should also include ways to enhance your company culture and employee engagement.
- Groom Your Successor. Chances are, you are a vital part of the key operations of your business; but in all likeliness, you will not remain with the business after the sale of your company. Your exit strategy should include cultivating and mentoring key members of your management team to compensate for your departure and carryover your skill set and knowledge post-sale. High level, capable management, even a right-hand senior staff member will be a crucial asset to the Buyer and an important linchpin in the sale of your business.
- Get Your Books in Order. Serious buyers will want to take a good hard look at your books and will generally request three to five years of accounting data to verify financial success. If you don’t already have stalwart systems in place, now is the time to standardize your accounting and clean up your balance sheet. Beyond giving buyers information they need to make educated conclusions about the viability of your business, formal statements and transparent numbers reflect well on your business’s overall record keeping, organization, professionalism and management.
- Talk to a Business Broker. Even if you are not ready to consider selling your business right now, a business broker with expertise in your industry can help you enormously in positioning your business for a future sale. A seasoned broker has ear-to-the-ground knowledge of current markets and impending industry trends and can often advise you on the ideal timing of the sale of your business. It is essential that your broker be a part of your Advisory team as he or she will have the skills which compliment those of your CPA, attorney, and investment advisor.
If you are even toying with the idea of selling your business in the foreseeable future, now is the time to tighten up your books, scale your business and start building a relationship with a respected broker. It is just smart business.
Please note: Our office is in Denver, and our business brokers cover all of Colorado, the Front Range, and the greater Denver metro area. If you’re looking for a “business broker near me,” we fit the bill if you’re anywhere in Colorado, New Mexico, or Wyoming.