What can you do now if you plan to sell later?
Selling a business requires a lot of planning, or at least it should if you do it properly. Although we’ve seen some people just give away their life’s work or sell it for peanuts, we strongly suggest you don’t do that. Take the key steps before the sale to make the process as easy and profitable as possible.
Prepare for the sale as early as possible. No matter why you want to sell your business, it’s important to focus on the long-term objective, otherwise, you could end up making short-term decisions that go against your plans. Get organized, write out a system, and go by the playbook. The improvements you make will ease the transition for the future buyer and keep the business running smoothly.
Know your numbers
First things first, get your business financials in order. QuickBook (or your preferred cloud-based accounting system) has several ready-made templates you can pull to see your current profits, which receivable accounts are tardy or due soon, and whether you need to send out any last-minute invoices. Prepare financial statements and projections, and then research the key metrics for your industry to compare against your company’s Key Performance Indicators.
Gather your team
Next, talk to your accountant and advisors to really understand the numbers. What is the financial position of the business? What’s your relative growth in gross sales and net income? Are you in alignment with your forward projections? Do you have outstanding liabilities? How many customers are on your list? Do Not do your own accounting if you’re planning to sell. When someone is interested in buying your business, they’ll ask for the last two years of tax returns.
Define your financial needs and goals
Before imagining all the ways to sell your business, first consider your ultimate goals for selling. Do you want to sell one hundred percent of the company and walk away with cash? Do you dream of passing the business on to family members or employees? Would you be willing to work for a few years after selling? How important is it that the brand continues on? What are your plans after the sale of your company? What are your cash needs after all is said and done?
As we’ve said, it’s best to start planning as early as possible so you have time to make adjustments. You may need to pay down debt, grow your customer list, or ensure you have contracts in place with customers. Even if you don’t need to make any big changes, incomplete and messy books will kill a deal before it even gets started.
Working with a team of specialists can help you navigate all of your options in the planning stage. Ask them what do you not know? What else should you be doing that you’re not doing? They’ll help you take the appropriate steps to increase your business’s value and maximize its sale price. Eventually, you may want to consider having an independent audit of your financials. A business valuation will determine the worth of your business to make sure you don’t price it too high or too low. The business appraiser’s detailed explanation will bring credibility to your asking price.
Get more business-like about your business
In the meantime, think like a buyer to recognize what they will be looking for. Don’t enter into any long-term debt arrangements, including long leases on office space, or even a truck or car. Whittle down your expenses, and ask for bigger discounts and better terms from your largest suppliers. If you’re an entrepreneur with a creative service-based business, check out this cash flow management article for ideas on quarterly goals, pricing terms, boosting net profit margins, and documenting processes. Another article on improving cash flow covers using AI for data analytics to help with Accounts Receivable Management and various strategies that can help improve cash flow situations.
Improve workflows and processes
Are your workflows and organizational processes something that would look good to someone else or not? If they’re not, find ways to track your everyday tasks and responsibilities and your progress. Enhancing your productivity and efficiency is important. There are several beneficial workflow apps that exist and can make your small business tasks much easier to handle. What aspects of your business should you be handing off to professionals, such as marketing, accounting (bookkeeping and tax), legalities, and more?
What’s the default setting as it stands? You need to establish exactly what your business workflow is like before you change anything. New strategies take time to implement, test, evaluate, and get used to. Develop a chart with all the functional areas of your company included. Start at the first point of contact with a potential customer/client. Document the flow of the job as it passes through the functional area from start to finish until it passes on to the next functional area. As you look at all the areas, track what actually happens every day/week/month and not just what tasks that need to be looked after. There’s a difference because when it comes to writing the systems, you will know what is working and what isn’t in every part of your business. You will be ready to find better and more efficient ways of conducting your business. Loom can help your computer work by screen recording your actions.
Creating and introducing business systems that really work is the key to a Ready-To-Sell business, one that is streamlined, productive, and profitable. By concentrating on the fundamentals of ‘how you do it’, you will set up a chain of activities that ensures that your business will run smoothly even when you’re not there.
Finding a buyer
When it’s time, consult again with your team of advisors, including accountants and lawyers, some of whom keep an eye out for businesses that are for sale. They may also tell small business brokers and industry associations that you’re interested in selling. Then put the word out through your circle of acquaintances within the industry. The easiest sell, the lowest hanging fruit, would be having a competitor gain your client list. No matter what, don’t just post your financials online, get an intermediary between you and buyers. Remember, as with most sale situations, if you’re in a hurry, you probably won’t realize the return you want.
Start planning now
Here at UpSide, we help creative professionals like yourself experience success and growth so you can eventually sell. Start planning now because it takes a minimum of two years to set up your business in a way that is more valuable and saleable. You are a creator, not a number-cruncher. Our team at UpSide Accounting makes sure you’re on track financially so that you can focus on what you do best. If you want to learn more about how we can help you and your business so it can be sellable, we would be happy to chat.