Most business owners who plan to sell their business have an exit strategy—or at least they should. While they may have thought about selling at some point, they haven’t necessarily prepared for that eventuality. In fact, according to an independent survey of business owners, 79% of owners don’t have a written plan to accomplish their goal of selling and only 20% have a written plan for succession.
The fact is, if you want to sell your business someday, you need to have a plan. Follow these steps to help you prepare to sell your business on your terms.
You built your business on a dream, but it took a spark to get you to act on it and turn your vision into reality. So, begin with pinpointing the spark. What would it take for you to hand over the reins of your business? Most business owners surveyed wanted to find a buyer or successor that met their requirements. The second highest number of owners wanted to be financially secure enough for retirement. Other business owners wanted to continue working on their business until a certain age or for as long as their health allowed, or wait until their business reached a benchmark value.
Next, picture life after selling your business. Does the thought of leaving work behind send you into a slight panic? Some owners want to stay involved in their business without the stress and responsibility of ownership, and may enjoy stepping into a part-time or consultancy role. Others prefer to make a clean break after selling their business to enjoy retirement or seek out a new challenge. Identifying your end goal is the first step in the process of creating a road map to get there.
With your end goal in sight, the next step is to determine what you need to do to reach it. For many business owners, their business and personal lives are intertwined and the business makes up a significant component of their net worth. Balancing your personal needs with the needs of your business is a top priority. As a result, you can’t underestimate the importance of long-term planning to evaluate your retirement needs and the corresponding portfolio necessary to meet them. Do you know how much you need in your portfolio to retire comfortably?
Next, compare your financial needs to the value of your business. Business owners typically have a sense of what their business is worth, but the best course of action at this point is to consult a qualified business valuation expert. A business appraisal will provide you with an objective opinion of fair market value along with analyses and evidence to support the conclusion. If you have a successor or strategic purchaser in line, you may also want an estimate of investment value, or liquidation value if you plan to sell off assets.
A key obstacle for many business owners is knowing how to maximize their business’s value in the eyes of a potential buyer. A business appraisal provides a secondary benefit of objective insight into a business’s value drivers and competitive advantages and disadvantages. Applying that information toward improving your day-to-day operations will help increase profits and chances for a favorable outcome when you’re ready to sell.
Is your business set up to run smoothly without you? Potential buyers are interested in businesses positioned for continued success under new management. Implementing standard procedures and maintaining clear financial records can go a long way in showing buyers that your business is sustainable. Additionally, begin delegating your responsibilities to other key employees, and take steps to cultivate the next generation of management, including a compensation structure that provides them the incentive to see the business through a successful transition.
Once you have completed the steps above and are ready to formalize your plan, the final step is to work with a team of professionals you trust to guide you through the business succession planning process. At Coign Capital Advisors, we partner with you each step of the way. Our goal is to understand your needs and objectives, the value of the business and its future growth potential, and to develop an exit strategy for the most favorable outcome. To get started, send us an email at email@example.com or call 801-676-4582.
Coign Capital Advisors is a fee-based investment advisory firm based in Draper, Utah. Specializing in serving retirees, business owners, and entrepreneurs, the firm provides holistic wealth management that goes far beyond investment consulting and strives to attain suitable performance combined with solutions that make clients’ financial goals achievable. Led by J. Matthew Zundel, Robert P. Welch, M. Brandon Riley, Adam G. Lefler, Daniel R. Zundel and Courtland Adams clients receive a high level of service from a team with more than 100 years of combined experience. To learn more, visit www.coigncapital.com.
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