When you set out in business for yourself, probably the last thing that’s on your mind is how you’re going to get rid of the (hopefully successful) company you’ve built. And it’s certainly true that you shouldn’t focus on your exit strategy to the detriment of actually running your company say entrepreneur Scott Vollero.
At the same time, it’s critical to keep your business sale strategy in the back of your mind. That often means getting your corporate house in order before anyone else knows the firm is up for sale.
According to Dan Wright, a Seattle-area business expert writing for Seattle Business Magazine, there are plenty of things you can do to make sure your business is in good shape to sell — and fetches the price you deserve. Here’s a look at some of the most important considerations to address prior to putting your company out there.
- Separate and Streamline Business Components
Even if you intimately understand the value that each of your business’s disparate divisions brings to the table, prospective buyers might not. Buyers tend to frown upon companies that lump together operationally distinct silos; some may choose to pass entirely, while others might offer a discount for the trouble of sorting everything out after purchase. Avoid this outcome by clearly compartmentalizing your company’s components and making clear the value that prospective buyers should attach to each.
- Cross Your T’s and Dot Your I’s
Legal hangups delay or kill countless mergers and acquisitions. Don’t let it happen to you. Before putting yourself up for sale:
- Make sure your company has a clear, tax-favorable corporate structure in place
- Pin down key employees on whether they’re willing to stick around after the same, knowing full well that the buyer may shake things up anyway
- Ensure that your financial records are up to date and conform to accounting best practices
- Secure all business-critical intellectual property; failure to do so could render your company unsalable
- Determine Whether You’ll Still Be Involved
Before you even think about shopping your company, ask yourself whether you’d countenance continued involvement after the sale. Are you fully committed to jumping into a different line of work (or jetting off to a tropical island) before the ink is dry on the purchase agreement, or are you willing to stay involved with your firm when you no longer control it? There are benefits, drawbacks, and complex considerations on both sides of the coin.
- Figure Out Why Your Business Is Valuable, Not Just How Much It’s Worth
Don’t focus too much on how much your business is likely to sell for. Instead, focus on why it’s likely to be valuable to buyers. Are you attractive to larger competitors in a particular regional market? Do you have a superior process or technology? Are your assets, such as land and equipment, particularly valuable? If you can thoughtfully answer these questions, you may find it easier to find the right buyer — and increase your firm’s sale price.
Have you ever been through the business sale gauntlet? What advice do you have for fellow business owners who might be thinking about moving on?
Scott Vollero is an international entrepreneur and expert in the precious metals and automotive parts recycling industries.