Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” This holds true in all aspects of our lives, particularly when it comes to succession planning and selling a business. The Baby Boomer generation is moving into retirement age, and if you’re a business owner, you may be at the point in your life that you’re considering selling your business.
To successfully sell a business, it is important to form an exit strategy at least five years before a business owner is considering selling his or her business. Many small and mid-sized businesses are not ready to be sold. So what are the top things that you can do to ensure your business is ready?
What are the weaknesses and strengths of the business? You need to identify your strengths, weaknesses, opportunities and threats. By identifying your weaknesses well in advance, you will be able to address issues and adjust your strategies accordingly. If, for example, your business is dependent on one company’s revenue, you will need to start diversifying your revenue by bringing in more clients that contribute a mid-range percentage to your revenue. Or maybe you have a product, customer or department that is dragging the value of the business down. The weaknesses and threats portion of a SWOT analysis will help you identify these.
By identifying strengths and opportunities, you will be able to contribute to your pitch when selling your business. Your business will be more attractive to a buyer if you’ve identified what you are really good at. What is driving the value of your business? Figure that out and make it the one thing that will absolutely stand out when you’re selling your business.
Develop Your Employees
Do you have too much control of the day-to-day operations of the business? Take a step back and look at your team. Once you’ve done this, identify those members of your team that show the potential for leadership and management. They might not be ready right now, but with the proper training and investment in their professional development, they can be ready. Working on their development increases the value of your business because the buyer will have some measure of comfort that the efficiency will be the same when you step out of the picture.
Think About Your Future
Business owners should think about what they want out of retirement and how they would like to live during retirement. For example, if you own a second home and will continue to use this home, do you have enough income to cover the expenses of this property? If you aren’t prepared to live the life you would like to live after selling the business, it might be best to wait until you can. Knowing what your goals are in advance will help you with your planning.
Selling a business can be difficult not just financially but emotionally as well. So in order to make sure the process is as easy as possible:
- Know the value of your business.
- Maximize on resources such as your team and product lines.
- Make realistic goals and prepare for life after your business.
At Brown Schultz Sheridan & Fritz (BSSF), we’re committed to being the trusted advisor for all of our clients. If you’re thinking about selling your business, please contact us, and we’d be happy to provide you with assistance during this process.
ABOUT THE AUTHOR
Ryan B. Brown, CPA, CVA
Ryan specializes in providing accounting, auditing, and tax services in industries including truck dealerships, contractors, nonprofits, and other closely held businesses. As an Audit Manager, Ryan is involved in planning, performing, and supervising audits, reviews, and compilations. He also provides tax services for audit, as well as individual clients.