You’ve thought about it for some time and the idea sounds great – sell your business for a bundle and retire to a great life of leisure, travel, family and friends. You may even have been approached by a legitimately interested and capable buyer or two. You may also have listened to a broker or two claiming to have coveted premium buyers for your business, ready to move, just sign here.
The reality is that selling your business is a complicated, rigorous and critically sequential process involving countless quantifiable variables along with the single largest qualifier – chance. Being ready to sell your business and having a business that’s ready for sale are two entirely different things. And seldom the two shall meet. That is, without the right expectations, perspective, preparation and contributions from your entire team.
Is my business ready for sale?
Let’s start at the beginning: Valuation. It’s what a willing buyer and willing seller agree to where both parties are duly informed of the relevant facts. It requires two sides to validate. You may have an idea of how much you want to walk away with from a sale, and move on with your life. But is that number an accurate business valuation based on economic, financial and market factors that a buyer would accept? Probably not.
So how do I identify the factors that contribute to accurate valuation expectations for my business? More importantly, how do I improve those factors to the extent that I can positively influence, even maximize, the value of my business? This is understanding if your business is ready for sale. Ready to get started?
The value of your business – to you and to a buyer – is what it is expected to generate in free cash in the future. That’s right, the value of your business today is determined subjectively by what profits it is expected to deliver in the future. Is your business ready for the future? Your products or services, your people, your business processes, your front end, your back end and everything in between. Are all the factors that make your business what it is today ready for the future? Specifically we can find strengths, weaknesses, opportunities and threats (“SWOT”) in the following places:
- Stage of business development
- Competitive advantages
- Size and growth potential for markets served
- Market share
- Diversity and stability of revenue
- Quality and depth of management team
- Name recognition and reputation
- Barriers to entry
- Type and quality of assets
- Financial condition and ability to provide for ongoing capital requirements
- Ability to generate free cash flow and/or pay dividends
- Economic conditions in industry and financial environment
As you can see, getting your business ready for sale is a lot more complicated than thinking you are ready to sell your business. Fortunately there’s help out there ready for you at ALIGNMT.