Before Selling Your Business – Ask Yourself These 5 Questions

succession planningWhen you think about your exit strategy or succession planning for your business, selling your business will come up as one of your options.  Before you consider selling your business, ask yourself the following 5 questions. If your answers are all yes, you have a good chance of selling your company at higher price. If your answer is “No” to any of the questions, you have a room to increase the value of your company. Planning early will ensure you are well prepared when the time comes.

  1. Does your company have a competent management team? If the future success of your company depends on a one person (you), it could degrade the value of your company.  If your company has a great management team, it makes it easier for a potential buyer to envision how the company could continue to grow and expand even without you.
  2. Does your company differentiate your product or services? Differentiating your business creates opportunities for increasing cash flow and profitability as well as diversifying your customer base. All of these factors increase the value of your business.
  3. Are you trying to maximizing cash flow rather than minimizing taxes? Many business owners might have a mindset that minimizing taxes is a proper action to take as a business owner – which might negatively affect your cash flow.  If you are considering selling your business, you need to switch to maximizing cash flow.  Cash flow is one of the most important components in a business valuation.
  4. Do you have credible financial statements? Being able to show reviewed or audited financial statements to potential buyers makes a huge difference.  Having credible financial statements make the investment on your company less risky.
  5. Does your company generate a steady increase in sales and profits? It is common sense that buyers are willing to pay more for companies which are growing and increasing profits. When predicting future earnings, operating results of recent years are given greater consideration as they project positive growth. That means that the most profitable years will be used to determine the value of business.

Have you planned your exit strategy? Don’t wait, start the conversation now to ensure you can get top dollar for your business at the time of sale.

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