Often times there are no family members in the business capable of taking the reins or the business owner needs to liquidate the business in order to have sufficient assets outside of the business to live on.
Businesses don’t just sell. You don’t just put a sign up and sell your business. In fact only 20 to 30 percent of the businesses that are put up for sale actually sell.1 In our experience, one of the most significant problems is that business owners don’t include exit planning as part of their suite of critical planning processes.
Businesses need to be prepared for sale. When you sell a piece of real property, you usually take action to prepare the property for sale so that you can receive top dollar. Selling a business is no different. There is a process you should be going through to make your business attractive to buyers.
Another problem is that a business usually is not worth what the owner believes it is. Remember, the most important perspective of the value of a business is the buyer’s perspective. Sellers need to look at their businesses as a buyer would.
Sellers also need to use buyer metrics to value their business, and they need to take a careful look at the risks to a buyer of receiving the return that they expect. If a buyer sees more risk, they will reduce the multiple so that they can recover their investment in a shorter period of time. That reduces the price that a Seller gets. We help Sellers evaluate their businesses, conduct a pre-sale due diligence and then develop a strategy to increase the value of their business.
We help business owners reduce the risk areas where the sale might break down.
When you are selling a business there are several important stages. Preparation should begin well in advance of the sale, but often we don’t see clients until after a Letter of Intent has been signed.
At whatever stage you are in, we will take you through a process to strengthen your position in the business:
- First, we conduct a pre-sale due diligence audit. The purpose is to find any problem areas and attempt to address them prior to the sale.
- Second, we make sure that the business owner has a good grasp of the value of their business from the vantage point of the Buyer.
- Next, we help the Seller understand how much they will actually net from the sale.
Buyers may second-guess the purchase at some point in the process, usually associated with some unexpected problem or delay. We are there with you through the entire transaction process to mitigate those unexpected problems.