Selling Your Business:
How to Not Sell
Your Business Short

Published by William T. Fricke at May 11, 2021

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A successful business takes significant effort and planning to build. In the busy process of growing a business, many owners can forget to think about their exit plan. Ideally, a business should be sustainable and strong even after the owner retires, transfers, or sells the business. Whether you plan to sell your company or pass it on to family, you need to think about the future of the business beyond yourself. Fricke & Associates, LLC can help you strengthen your business for longevity, success, and sustainability. With the right exit plan, whether you sell or keep it in the family, your company can continue to thrive. If you are considering selling your business, follow these tips to achieve the best outcome:

·        Know What Your Business is Worth—You worked hard to build and grow your business, so you should receive what it is worth when you choose to sell. Also, you want to avoid overvaluing your company and not being able to sell it. The best way to determine your company’s worth is to run a CCA (Comparable Company Analysis). Basically, a CCA looks at your business in comparison to similar size companies in your same industry. Although there are some assumptions being made in the analysis, if a company like yours is sold for a certain amount, that at least gives you a general idea of your market value. If you need help with your CCA, we are glad to offer support.

·        Make Sure You Have Clear Financials—If someone is considering purchasing your company, they will want to know that the deal has a strong ROI (Return On Investment). Your financial records will show whether your company is profitable  and worth what you are asking. The best way to ensure that your financials are clear is by letting a professional handle their preparation. Our professionals at Fricke & Associates, LLC will make sure that your financials help support the value of your company. Without clear financials, an individual or company who wants to purchase your company may even struggle to get a loan.

·        Ensure Your Business is Sustainable Without You—A business owner can become so entwined into their business that the company struggles to function without their input each day. If your company depends on you to answer every question and keep daily operations running, you need to empower your staff as soon as possible. You can ask a higher sales price if you can demonstrate how the business runs through your employees and established protocols. Your buyer wants to buy your functioning company, not your job. If your company relies upon you for everything, the business will be more likely to fail when leadership changes hands. For the sake of your sale price and the longevity of the business you worked so hard to build, make sure that your business will keep rolling with or without you.

·        Enlist a Broker and Advisors—If you are transferring your business to family, you can probably do a personal sale without much input. Otherwise, using a broker and financial advisors will be more likely to get you more offers and a higher sale price. Entrust your business sale to professionals with insight on business sales who have your best interests in mind. We have advised many businesses through their selling processes and we would be glad to help with yours as well.

·        Sell at The Right Time—If your business is growing, you are more likely to attract enthusiastic buyers. The chances of getting a good ROI will seem more promising when your company appears to be on its way up. There may be some buyers willing to buy in when your company is not doing well as a “fixer upper” of sorts, but you will be less likely to get what your business is worth or sell at all. Pay attention to your growth trends and plan your sell when your company is trending up.

·        Try to Minimize The Risk for The Buyer—Any buyer with business sense will be evaluating the purchase of your business in terms of risk. If you can diminish some of the risks, you could get a higher purchase price. Things that could reassure your buyer: the business runs without you, multiple people know the key operations of your business, diverse customer base, revenue diversification, provable income of the business, key employees willing to stay on, etc. Lower the buyer’s risk and you will be more likely to sell at your desired price.

Through careful planning, you can increase the chances of a profitable sell. The team at Fricke & Associates, LLC can help you prepare your exit plan and plan for selling your business. 

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