According to many Business Brokers and Mergers and Acquisitions Specialists, we're entering into a perfect storm created by baby boomers reaching retirement age and the country coming out of a recession. Boomer business owners who have wanted to retire, but have held their businesses off the market because of the recession, are now moving forward in increasing numbers.
Early in 2012, with the capital gains tax hike pending, tax considerations were the number one driver of business sales. But, according to a survey by Pepperdine University, the International Business Brokers Association and M&A Source, by the last quarter of 2012, baby boomer retirement had become the number one driver of small business sales. In fact, according to BizBuySell.com (an online site hosting business buying and selling activity) the sale of small businesses increased 56% in the first quarter of 2013 over the first quarter of 2012.
OK. We get it. There’s going to be a lot of businesses on the market over the next few years. That being so, how do you make your business stand out from the crowd? How do you make it attractive to buyers so you can get the deal you need to get to help secure your retirement?
Here are 3 tips for getting your business in shape to sell:
1. Enhance Your “Curb Appeal”
Studies have shown that a thorough detailing can add as much as 20% to the value of a used car. Whether it’s cleaning old debt off the books, getting rid of obsolete inventory, updating your IT infrastructure, or sprucing up your physical plant – updating and cleaning up your business before it goes on the market pays for itself many times over at the closing table. Buyers don’t want to buy a business that appears to have been neglected. They don’t want to have to replace the phone system or deal with some uncollectable receivable on their first day of business. They want everything to be in place, bright and shiny and ready to help them realize their dreams.
2. Start Letting Go of the Reins
Some business owners have trouble delegating – they keep their hands tight on the reins, make all the important decisions themselves and are the main point of contact with key customers. That’s great as long as it works, but it’s not so great when it’s time to sell. Buyers will avoid or discount companies where all decision making and key customer relationships reside with the owner. If you don’t already have one, it’s important to create a strong second level of management before you put your company on the market. Start delegating decision making to your next-in-command. Transition key customer relationships to trusted managers. It may be painful for some owners to give up some control, but it will yield strong dividends at the sales table.
3. Start a Relationship with an Experienced Business Broker or M&A Advisor
Even if you are not ready to sell today, it makes sense to meet with a qualified Business Broker or M&A Advisor. An experienced professional can advise you as to changes you need to make in your business to make it more attractive to buyers, educate you as to what you can expect during the process of selling, package your business to show it off in its best light to command the highest price, and guide you through potential pitfalls.
It can take a year or more to sell a business. To discuss your situation and start your personal planning, click on the link below, visit us at www.primeinvestments.us or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.
There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.