According To The Statement Of Cash Flows An Increase Preparing Your Business For Sale – How to Cash Out

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Preparing Your Business For Sale – How to Cash Out

Savvy business owners know that running a successful company requires you to be a great marketer, control your costs, and provide incredible customer service. However, when it comes time to sell your business, it’s important to come up with a strategy that puts you and your company in the best position. When the time comes, you’ll be ready knowing that creating and implementing an exit strategy for your business can bring you a lot less stress and peace of mind.

Selling your business should be a planned process to get you the highest possible price for the company; No knee-jerk sales based on uncontrollable circumstances such as health problems, financial problems or untimely death.

Developing a successful exit plan should begin well in advance of your target exit date (I recommend at least three years). Here are some things to consider as you get started:

Get your personal financial picture in order.

As a prospective vendor, make sure you have adequate coverage with life insurance, disability insurance, and even business interruption insurance to protect your company in the event of a disaster.

I also suggest seeing a certified financial planner. Often a seller’s greatest asset is their business. If the owner is forced to sell after months or years of minimal profit, they may not be able to sell at the maximum price and exit with the cash they expected. A planner may recommend increasing cash reserves or acquiring real estate to balance your portfolio.

Understand what buyers are buying.

Most business buyers buy cash flow or net profit. Show financial strength by providing (at least) a copy of your business’s 3-year profit and loss statements, 3-year federal tax returns, equipment list, inventory list, and facility lease.

Equally important is the building lease. A key factor for a new buyer when a business changes hands is being able to secure a long-term lease. Lease negotiations can make or break a deal so it’s best to know the landlord’s intentions as soon as you decide to sell.

I recommend systematizing your business by creating operating manuals for each area of ​​your company. Standard procedures provide the buyer with an existing system for success and allow you to easily transfer information to the new owner.

What is its price?

Now that you understand what a buyer wants, you need to determine what you want as a seller. Every seller should ask themselves, “How much cash do I want to receive at closing?” or “What is my premium price?”

A key factor in achieving the highest price is for the seller to offer to carry a promissory note, making the seller a banker for a portion of the purchase price. By offering to carry a note, the seller shows the buyer that he or she believes in the business and remains financially invested in the company’s success after the sale.

When pricing a business for sale, the more reasonable the business price, the faster the business will sell. Be sure to enlist a certified business appraiser or experienced business broker to give you an opinion of value. By adding value back to the financial statements, the buyer will have a better idea of ​​how much income he expects to receive when taking over the company.

After obtaining your company’s valuation, compare the current value of your business to your proposed exit date and premium price expectations. Is your premium price realistic? Is the time frame realistic to achieve the sales levels required to achieve that price? To achieve your goal, all elements must come together.

Getting your maximum price.

If you decide that you won’t be able to get the price you want, you should start implementing strategies for change as soon as possible. Start with a simple SWOT analysis looking at your company’s strengths, weaknesses, opportunities and threats. Necessary strategies may include creating a marketing plan to increase your sales or a cost containment strategy to reduce your expenses.

As a business owner, you deserve the highest possible price for your company. Plan your exit strategy with the same amount of thought and detail that you plan your customer service strategy or create your marketing plan. Ultimately, all business owners will exit their business whether they plan for it or not, and a good plan can be the difference between your dream “retirement” or just a long vacation.

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