Are you considering selling your business? Taking the time to prepare has big benefits!
Preparing your business for sale is almost as important as the sale itself. Your business will only be sold once, therefor careful planning is essential to a successful sale.
If you approach selling your business early enough, allowing for a one to two year time frame, you can position your business to show its true value in the marketplace.
Buyers are looking at cash flows and cap rates. It makes sense for you to focus on increasing cash flow and cleaning up your books.
Here are 4 strategies to get you started.
Strategy 1 – Aggressively build up sales with minimal cost
Call all your past customers and resurrect them as active customers. There is no cost to picking up the phone, sending an email or making a personal visit to reconnect with past customers. Many of them will be happy to hear from you!
Attract new customers by offering an incentive. This can be done online at a low cost.
If you take unreported cash sales out of the business, start recording them as income. The first 1/2 inch at the top of your income statement is the most important. Revenues. Also, you have to save face. Unreported sales will add suspicion in the eyes of a buyer. How can they trust you? What else are you not recording? And the list goes on. All successful business sales are based on trust.
Strategy 2 – Receivables
Get your Account Receivables up to date.
If you have slow paying customers, offer them incentives to pay faster. You will enhance revenue and the valuation of your business.
Strategy 3 – Clean up your expenses
Go through all your business expenses with a fine tooth comb.
Salaries and Wages:
Do you have unproductive family members on your payroll?
If you are the heart and soul of your business, you need to start distancing yourself for the day to day operations of the business. Hire a manager to do the day to day operations of the business, including working with the customers. This is not a cost savings, but essential to demonstrate your business can run without you.
Take a good look at your staff. You may be putting off letting go of some your employees. It is one of the hardest things to do as a business owner. If an employee needs to be let go, better it comes from you then a stranger.
As harsh as it sounds, now is the time to take a good hard look at your workforce. Consider replacing over paid employees. Are all your employees really needed? Are your salaries and wages out of proportion to the business’ revenues?
What about your salary? Are you over paying or under paying your self in comparison to fair market wages? Here is a link to standard Alberta wages: http://occinfo.alis.alberta.ca/occinfopreview/info/browse-wages.html
Unread magazine subscriptions
Unnecessary business trips , meals and entertaining.
Company vehicles used for personal benefit
Any discretionary spending going through the business that are personal – office supplies for home use, grocery bills, gas, furniture, decor items, postage should be constrained in the lead up to a business sale.
You will be surprised by all the “found” money! It can add up to thousands of dollars.
Strategy 4 – Inventory and Equipment
Sell! Sell! Sell!
Clear out all your old stock. The Buyer won’t want it, so you may as well convert it to cash now. Ensure all your inventory is current and salable.
The same holds true for equipment and machinery. Obsolete and unused equipment needs to go. Your business should be looking clean and organized. A bunch of junk piled up in the corner or hidden away in the basement is unappealing and looks unprofessional.
Just like selling a house, decluttering and a fresh coat of paint goes a long way towards how buyers will perceive your business. You only get one shot at making a first impression. Make your business shine!