Business Sales Ramp Up in 2011

Many owners are not ready to sell their business, either emotionally or business-wise. Then a health problem or a bad year forces their hand. Well, the past few years have been a time to cut unnecessary expenses, make ends meet and to patiently wait for the market to rebound.
But 2010 saw a slight improvement in the business-for-sale market and many experts expect that 2011 will be a turning point. Financing options are improving for buyers and banks are putting a new focus on lending.
So, if you're thinking of selling your business this year, here are four tips to maximize your profit
Plan Today for the End 
Steven Covey said "Keep the End in Mind" when planning today, even if it is 10 years away. Like they do for any big purchase, business buyers will do their research before signing on the dotted line. That means it's important for sellers to be ready to demonstrate their business is worth the asking price. Make sure your financial records are kept in order. 
Keep a minimum of three years of documents, including expense records. These are essential to establish buyer trust in the economic history of the business. Over-reliance on one or a few key customers and any outstanding legal issues are actually a target for some private equity firms.
Don't forget the physical elements of the business as well. Tidy up and get done those building improvements such as painting the storefront, cleaning up the distribution facility or re-decorating the interior. The physical appearance is often the first impression a buyer gets, so make sure it's a positive one.
Understand Your Fair Price
To set your asking price accurately, you need to know where you are in the market compared to other businesses for sale. Overestimating your value can lead to a long and difficult sale process, while underestimating will leave money on the table. Expect an improved selling environment in 2011, but don't make the mistake of asking for pre-recessionary prices.
Take a look at your own financials as well. If your business' revenue and cash flow have declined, take that into consideration. Buyers will. 
The downturn is here to stay and looking back at past year's revenues will not make buyers agree that those days will return. The goal is to set a price that will attract the greatest number of serious buyers and enable you to close a deal at the highest possible price.
Market Professionally
One way to get a leg up on the competition and ensure the best possible outcome is to hire an accomplished business advisor. Check references carefully and see if you can find additional references they don't provide themselves. 
Be Prepared To Offer Financing
In today's market, seller financing is essential. That means you may be required to take a minimum of 20 percent of the sale price in the form of a buyer note that the buyer will pay back over time, with interest. This also means that you'll have an investment in the business even after the sale. The buyer and lender will expect you to participate in a successful transition with the new owner and to help get them off to a strong start.

2 comments:

Tom Deans said...

Starting with the end in mind is such a terrific reminder that you will have one final day at the office. Knowing how and when you will exit your business will not only help you monetize your life's work, but you'll run a profoundly more profitable business today. I met a genetlman who selected the colours for his new logo when he incorporated his business based on how it would compliment the logo of the firm he thought would buy his business in 20 years. Now that's starting with the end in mind.

Great Blog -- keep' em coming.

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