Planning to sell your business within the next five years? If so, get in line. So are approximately four million other business owners. Can your business fetch the best possible price in a buyers’ market?
With so many entrepreneurial Baby Boomers approaching retirement and angling to exodus into their golden years, how will your business emerge as the one worth buying – the one worth top dollar? A recent executive survey conducted by Margolin, Winer & Evens showed that one-third of respondents plan to sell their businesses within 10 years, and 55% had done nothing to prepare for the sale.
The sooner a business starts preparing for sale, the better its chances of commanding a premium price. Prepping a business for a high selling price is a strategic undertaking. Factors such as management, recordkeeping, financial hygiene and internal controls can make a business more attractive than its competitors in the eyes of buyers.
For example, polishing income statements by implementing costs savings a few years before a sale can make a business worth a higher price. EBITDA – earnings before interest, taxes, depreciation and amortization – is a common tool for measuring the performance of an enterprise. A strong income statement and EBITDA can attract buyers willing to pay a maximum multiple for the business.
But aligning the right elements to boost a business’ value takes time. Aspects of profitable transitions – such as management continuity, a solid financial position and strong internal controls – require considerable contemplation, a head start and advisors with the right expertise, experience and insight.
Experts who understand the complexities and nuances of a particular business can help position companies for the highest possible sales price. These experts bring know-how for increasing the business’ value and offer services such as income statement analysis, cash flow projections and benchmarking services that demonstrate how a particular business compares with its competitors.
Preparing a business for future sale may also mean growing that business now. Perhaps it’s time to buy a competitor. Perhaps an untapped market exists that can exponentially increase sales. Perhaps some inventory changes can result in significant improvements in cash flow. How can tax liabilities be minimized upon sale? Experts who understand how to position business owners to sell their companies for top dollar and maximum profitability can lead soon-to-be sellers down lucrative paths for bulking up a business’ worth and position them for the most profitable exit strategies.
Baby boomers who plan to sell their businesses and haven’t prepared to reel in the highest possible price are leaving money on the table. Those who don’t prep will have to take whatever price they’re offered – if they’re offered anything at all in the looming buyers’ market.
Position the right team in place now. Executives who plan to sell their businesses in the next few years should consider whether their financial advisors are addressing their future sale. If they are, those advisors are appropriately looking at their client’s big picture. If they aren’t, well, why aren’t they?