Many business owners, when they get their business up and running, do not think about how to sell their company down the road. But why not? When you start your business, you may have plans to keep it in the family or planning for your exit is just one more thing on your plate that you just don’t have the time for. But what if something happens, and you need to retire early? Or your children don’t want to take over your company? Or you need to move to California to take care of your ailing parent? These unexpected circumstances are exactly why it is important to plan how to sell y our company from day one (or today) – there is no time like the present!
If you are starting your exit plan today, good for you, many advisors will say that you need to build in at least three years of preparation prior to your eventual exit. Three years is plenty of time to get your business in tip top shape so that when it comes time to sell you have clean books, well documented processes and a great manager who has slowly been taking on more and more of your daily responsibilities. During a business acquisition, a business broker (and the eventual buyer) will typically need to review at least three years of profit & loss statements and tax returns to best understand the history and future of the business. So three years out can be an ideal place to start planning.
Another item to consider when planning to sell your business, is your company’s growth path. If your business is on a negative growth path, it would be a great time to build additional value into your business and work harder to get those numbers up! Buyer’s love to see positive growth trends within a potential business purchase and this will also mean a higher return on investment for you at the closing table. If your company is on a positive growth path, than selling while it’s value is still growing will mean a much higher return on investment for you. Even though this may seem like the time you should be reaping the benefits of your business, waiting out the growth period can mean trying to sell with falling profits, which can be a very difficult prospect.
To discuss how to sell your business and how to identify when to exit, I invite you to schedule a consultation with one of our experienced brokers today and they will be able to guide you through the decision making process!
Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A longtime resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master’s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.