You’ve invested countless hours in making your business a success. When it’s time to sell your business, you want to know it will be in good hands and that you’ll receive a fair price. In the years leading up to your intended sale, it’s a good idea to create a business succession plan to help you set personal and business goals, create a timeline for the transition of leadership, and plan for related financial and tax considerations. Once you’ve set up this plan, follow these three strategies to help you prepare for a successful business sale.
Business Succession Planning
- Understand the Value of Your Business
Because buyers want the best possible price, they may try to point out deficiencies in your business’s operations or financial history to justify a lower bid. To prepare for potentially aggressive negotiations, consider working with an experienced business broker. Also, make sure you know what your business is worth by contacting a financial professional at Prosperis Financial Solutions for a FREE, professional business valuation. For small businesses, the two main methods of business valuation are asset-based valuation and the earnings-multiplier method.
- Set Up a Strong Management Team
Prospective buyers want to be confident that your business’s operations, customer relationships, and revenue won’t suffer because you have left. Having a skilled and dedicated leadership team already in place is an important way you can show you’re leaving the business in capable hands. In the years leading up to the planned sale, prepare your most trusted employees for leadership roles by providing specialized training and more oversight of day-to-day functions. As your managers grow into their roles, start reducing your own management duties to support this transition.
- Prepare Your Financials
One of the biggest mistakes a seller can make is to provide prospective buyers with shoddy financial documents. Inaccurate or incomplete records suggest a business is either poorly managed or dishonest. If would-be buyers don’t walk away from the deal altogether, they may use this poor recordkeeping as leverage to drive down the sale price. Thorough, well-organized records will help you paint an accurate picture of your business and help assure risk-averse prospective buyers that your business is well managed. Also, when you take time to evaluate and carefully organize your financials, you may spot inefficiencies you’ll need to address before your business is ready for sale.
When you’re getting ready to sell your business, it’s important to create a plan that will ensure steady retirement income for you while supporting your business’ ongoing success. At Sun National Bank, our knowledgeable advisors can help you address the many factors related to business succession and assist you in creating a business succession plan tailored to your goals.