Preparing to sell your business can be scary. Here’s something you’ve worked so hard to build and grow. Of course you want to know it will be continue to thrive beyond your time at the helm. You also want to be sure you get what you deserve for all your vision and effort. To maximize the value and sellability of your business, we suggest you consider and address these eight factors. Strong preparation will set you up in the best possible position to implement your exit strategy when the time comes.
The Eight Factors That Influence Sellability
How has your business performed over the last three to four years? Have sales been steady or growing in a sustainable fashion? Have any irregular, one-time events contributed to a spike or decline in sales?
After the owner’s compensation and other personal, discretionary expenses have been added back to the pre-tax profit, has the business shown a steady and sustained benefit to the owner?
Family Member Involvement
Are any of your family members involved in the business, such as a mother-in-law who handles the bookkeeping? Are they paid the current market-rate for their services? How difficult would they be to replace?
Does any one customer represent more than 10% of overall sales? How secure is this relationship and what efforts have you undertaken to diversity your customer base?
Is the business overly reliant on any one particular vendor? How easy would it be to find an alternative vendor? If your business were to lose its relationship with the vendor, what impact would it have on your business?
Bookkeeping & Financial Records
Does your bookkeeping accurately reflect the business’ income and expenses? Are your books and business taxes prepared by professionals? Can the tax returns, P&L and balance sheets be easily reconciled?
Market or Regulatory Changes
Are there any major market or regulatory changes on the horizon that may affect your business? One such example would be the trade tariffs of 2019, which drove up the cost of goods for certain industries.
Recurring or Guaranteed Income
While not relevant to all businesses, nonetheless having reliable sources of income minimizes risk and makes a business more attractive to a potential buyer.