The small business industry is ever changing with each business collecting new owners on an average of every five years. If you have owned your business for what seems to be forever, have just started a business or you are a new buyer “Stay Ready.” The time to sell may be much closer than you think.
Reasons to sell your business include retirement, cash out, new business interest or opportunities, surprise purchase offer, relocation, family, illness and yes burnout. Some provide time to prepare others don’t. So “Stay Ready”
Starting today, “Stay Ready” to sell your business; your business decisions today will affect your revenues and profits and ultimately your sales price down the road and it will make you money getting there.
The following are a few tips on Staying Ready:
1. Maintain accurate accounting and records:
This is a must to sell your business at its true value. Accurate accounting will usually shorten the selling time for a business and produce the highest offers in comparison to the listing price. Poor accounting and records are a prime reason a business sells below listed price or does not sell at all. You need three years of well-maintained accounting and records or accounting and records from day one if in business less than three years. “Stay Ready”
2. An issue now will be an issue later:
If you are concerned about something that may be affecting your business
today, fix it. It will be an issue when you sell and, in most cases, will cost you
more in an offer to buy than it would to fix it now. Plus, you will benefit from
your actions until you elect to sell your business. “Stay Ready”
“Report It” If your business makes 100k per year and you report 50k per year,
50k is the amount verified for your valuation. That will average out to
about 150k in lost value when pricing your business.
Three reasons to avoid this temptation:
1. Would you take a seller’s word that he/she made 50k more than reported?
2. Tell your lender that 50k was earned but not reported. (If you are foolish enough to believe #1 you most likely no longer have an interested lender) Financing is based on cash flow and assets and this deal no longer has the documents to prove the true cash flow so ultimately no financing.
3. There is an agency called the IRS who could become very interested with an inflated sale based on their record of recorded income.
So, “Stay Ready” and report accurate sales and profits. It will usually cost you more at the time of sale than you made over the past years by under reporting.
4. Prepare Your Replacement:
Can anyone run your business? What happens if you become ill, injured or have a family emergency? Do you have people and systems in place for someone to step in and successfully operate your business? New buyers may not have your experience and will be concerned if
the people and systems are not in place to provide them assurance to continue your
If you operate your business like you are selling it tomorrow, you will be continually improving your business. Down the road when you elect to sell your business the benefits will be very gratifying.
Owning a business is a dream. No mater the type of business you own or elect to own, your successes is in your hands. So, put yourself in a position for success to be your own Boss and always “Stay Ready”