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Selling a business can be a very emotional process, especially when the business owner has run the company for decades. I’ve seen it first-hand while helping many business owners sell their business over the past 15 years. The business can become integral to an owner’s identity and purpose.
Nine questions business owners should ask themselves in preparing to sell their business:
1. Why am I selling my business?
Ask yourself if you are looking to retire, focus on your health or seeking a new challenge.
2. What do I plan to do after I sell my business?
Ensure you are emotionally and psychologically prepared. Consider your retirement plans and goals, along with your spouse’s plans and goals. An advisor experienced in merger and acquisition transactions and succession planning can help to prepare you.
3. Will selling my business give me enough money to retire on, based on my retirement plans and goals?
A business valuator can help assess the value of your business and a wealth planner can help with your retirement financial strategy.
4. Am I key to the business, such that it can’t operate without me?
This is referred to as personal goodwill. Ideally, you should transition the key customer relationships and general business knowledge to a manager or management team in advance of a sale. Reducing your involvement prior to an eventual sale makes for a smooth transition and maximizes the value of the business.
5. Are my business policies and processes well documented?
Write down the tricks of the trade and keys to success to allow for an easy transition.
6. Is the business plateauing because I am overly complacent or risk averse?
It is a natural tendency for an older business owner to make more conservative strategic decisions compared to a younger owner.
7. Are my financial statements in order?
It is critical to ensure your financial records are in good order, easy to understand, follow proper accounting policies and error-free. Any errors or lack of clarity in your financial statements will lower the value of the business and can scare buyers away.
8. Am I willing to stay on for a transition period with a new buyer?
Many buyers require you stay involved for a period of transition that can be anywhere from one month to several years.
9. Who are the potential buyers for my business?
Consider your management team, as they understand the business and could be the easiest to transition. However, a competitor may offer the highest price due to synergies they would realize. There is no one size fits all solution. Ultimately, make the decision that is right for you.
The answers to these questions are telling. Sometimes you simply need a vacation – and sometimes you are legitimately ready to sell your business.
If you need assistance in selling your company or want advice regarding a pending transaction, let’s start the conversation. Contact Craig Maloney, MBA, CPA, CA, CBV at 902.493.5430 or [email protected]
Related Topics:Small Business; Selling a Business
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