Develop and implement a plan to refine the operation so it produces maximum profits and structure the business in a way that ownership can be transferred with minimum impact on operations and profitability. Our comprehensive, proven process addresses financial and non-financial aspects of value to maximize your outcome.
You only have one chance to make a positive first impression.
Here’s a checklist of what you need to do and understand to prepare your business for divestment.
Get the Records Straight
Some business owners are very diligent at keeping detailed, up-to-date accounts and records relating to contracts, customers, staff, leases, asset ownership etc. Some are not so diligent. The first step in preparing your business for exit is to get the books up to date so there is a clear picture of your operation, with supporting facts and projections. In addition to your actual accounts, speak with you LINK Business Transaction advisor about to preparing an assessment, including normalized EBITDA, projections, and comparable sales.
Eliminate the Perks
You will need to review how personal or non-recurring items that are paid for by the company, such as travel or entertainment, are managed. Unravelling personal expenditure from that of the business can make a big difference to the selling price. For example, a $20,000 trip paid for by the company is essentially $20,000 off the bottom line and could reduce the sale price by four or five times that amount. Review leased and financed assets to see whether they are better converted into fully-owned assets. In an ideal world, business owners should plan for the sale of their business from day one and work through a process of ‘grooming’ it to achieve optimal value.
Review Accounting Policies
Accounting policies vary widely. In some cases, business owners discover that their accounting policies are not the same as those currently adopted by others in their industry. Some accounting policies are tax driven, resulting in conservative profit recognition. Whereas others are earnings driven, seeking to maximize profit. Changing your accounting policies to conform to those of your industry may increase the market value of your business.
Are You Critical to the Business?
A business is more attractive if its success is not largely dependent on the input of the owner in terms of operational know-how, technical skill or personal relationships with clients or suppliers. It is helpful to have a reliable management team to demonstrate that the business will continue to be successful once the owner has left. Most buyers expect the seller to continue working in the business for a training period. Some buyer prefers a longer period, which can be negotiated. In some cases, a business owner may wish to stay involved in the business indefinitely, whether active or as a Board member.
Should You Invest in Your Business Prior to Sale?
When looking at a business, buyers will consider the level of debt and the quality of assets. Generally, the sensible advice is to continue investing in the business as if you were going to keep running it yourself. LINK Enterprise can provide advice on these and other aspects as part of an exit planning and valuation maximization project.
Will You Offer Finance?
It is not uncommon for a business owner to be asked to help finance the transaction or roll proceeds from the sale of the business into stock in the new entity. Either approach can help to achieve maximum value for the seller. It gives the purchaser additional confidence in the business, knowing that you will continue to have an interest in maintaining its success.
Information Required
LINK assists you with the preparation of the following information, in association with your advisors, to ensure the information is presented in the appropriate manner.
Profit and loss statements for three years and year-to-date
Balance Sheet for prior completed year and most recent complete month
A schedule of abnormal and/or non-recurring costs by year
Any schedule of costs to the benefit of ownership that the buyer will not need to repeat
Brochures or marketing information of your product(s) or service(s)
Historical background on the business
A list of the most impactful growth opportunities (revenues, profits) for the business
Schedule of plant, equipment, and any equipment leases
Real Estate details (whether owned or leased)
Lease details including rent, term, renewals, etc.
Organization Chart, including part-time employees and contractors
Staff employment contracts
Details on any trademarks, patents, licenses, agencies, or intellectual property (IP)
Details of any major strengths and/or commercial advantages
Competitor analysis
SWOT analysis
Business plan (If available) – We can help to develop the plan forward to maximize value
Interested to know how much your business is worth?
Our expert Business Transaction Advisors can help you assess the value of your business. Valuation is an excellent starting point toward deciding whether you are ready to sell or require assistance preparing to maximize valuation.
