Great Ideas for your Small Business: Be Prepared for the Sale
Thousands of small businesses change hands every year, but often not enough money is left in the hands of the seller. I asked David Troob, former chair of the Geneva Companies, an Irvine, California–based mergers and acquisitions firm, to share some advice about preparing your business for sale.
Here are his tips:
- Have an exit plan. “Most entrepreneurs have start-up plans and growth plans,” he said. “But too many fail to prepare for the time when they want to sell the business or reduce their day-to-day involvement.”
- Know the market value of your business. Know the value in the world marketplace. “Simple formulas are often misleading and inaccurate measures of the value of a private business.”
- Explore ways to increase value. “A business could be made more attractive to prospective buyers if changes are made in the organization, key personnel, or marketing strategies.”
- Understand when the market is ready. “Be ready when buyers are active, money is plentiful, and interest rates are low.”
- Don’t assume the best buyer is local.
- Document the growth potential of your business.
- Consider which perks you’ll miss after selling your business. “Usually the transaction can be structured to retain those executive perks which you enjoy while meeting the buyer’s needs.”
In addition to implementing these tips, be sure to work with a competent attorney and accountant. This is not a time to scrimp on professional help.