|
Planning An Exit Strategy |
Smart business owners plan ahead. Plans for an exit strategy should be a part of every business owner’s portfolio. Whether you are thinking of selling your business during the next year or ten years from now, planning is crucial. Here are things to consider when planning to sell:
n Remove yourself from the business. Are customers here because of you or because of the business? Begin taking a lower profile while increasing the profile of your product or services; develop a strong management team.
n Reduce your personal perks. Ensure that ALL personal perks flow through verifiable and specific expense lines; this will add to your cash flow at selling time.
n Increase your sales yearly. Rising sales, even by a small percentage, increase the intrinsic value of your business.
n Develop your brand. What sets your firm apart from your competitors? What does your firm do best? When your clients think of your firm, what do you want them to remember?
n Keep your accounts receivable higher than accounts payable. Keep your accounts receivable within 30 days.
n Sell all unnecessary assets. Selling a little-used piece of equipment often brings a greater return than including it at the time of the final sale.
n Reduce inventory. By lowering your inventory to the lowest level at which you can comfortably operate, you minimize the potential for out-dated, lower value inventory at time of sale.
n Employee Review. Employees are your most important resource. Recognize and reward valuable employees, eliminate unproductive employees. Try to replace family members (particularly if they are key to your operation) with other employees...if the business cannot run without them, the business is less saleable.
n Written procedures. Have job descriptions and written operations procedures for all employees. Buyers value well-organized operations; this organization will also ease the transition for both employees and the new management.
n Do not allow your largest customer to represent more than 20% of your business. In some businesses this is inevitable. While this can be economically sound from an owner’s view, a new buyer can be skittish when seeing how your company relies upon the continuing success, of one customer.
n Limit liabilities. Are your long-term notes assumable?
n Review lease. What options exist for lease transfer? For ending, extending your lease?
n Reduce unnecessary large purchases. Weigh the pay-back on your investment before a large purchase...could the item be leased?
n Website. A current and attractive website can be a valuable asset when describing your company to a potential buyer. q