The summer slowdown is a great time to take stock of your business. That includes planning for an eventual sale. The more planning you do today, the higher the price will be that you can eventually command. These three simple strategies can promote value in the present, while multiplying valuation in the future.
Deal With Your Red Flags
Certain red flags can send buyers running—especially the financial buyers who play such as key role in today’s market. Review your business. Be honest with yourself about areas of weakness, then create a plan to rectify that which you can change. Some common red flags include:
- Customer churn. High growth is great, but not if you have short customer life cycles. You need to examine your lead generation and conversion process, and how well you deliver on your promises.
- Legal exposure. Are your property rights ironclad? Do you have outstanding lawsuits you need to settle, or areas of exposure to a lawsuit? Legal risk won’t destroy a deal, but it can devalue it.
- Revenue concentration. If more than 20% of your revenue is in one or two accounts, you’re vulnerable.
- Key person liability: If your company is dependent upon the knowledge of a single person or two, especially the CEO, it’s time to start better distributing knowledge and responsibility.
Prepare for a Speedy Sale
Sales thrive on momentum. Delays often result in devaluation, lost momentum, and failed deals. Advanced preparation can help you achieve a faster deal. Much preparation involves simply getting organized. Some things you can do now include:
- Getting your books together, with the help of an accountant if necessary.
- Assembling legal documents.
- Gathering historical metrics and market data.
- Organizing future projections.
- Gathering plans for the future.
Finally, you need to get key shareholders on the same page. Managing their expectations now can help you avoid disasters down the road.
Build Your Team
Selling your business requires you to take on two full-time jobs at once. You must continue running the business while also dealing with the immense demands of the sale itself. You need advisors you trust, including a sell-side advisor, a skilled attorney, and a tax accountant.
It’s a wise idea to involve key executives early in the process. They will have to be involved in due diligence, and you’ll need them to handle operations during the deal. Your exit is not the time to begin planning for the future. Instead, work with your team now. Help them understand the reason for the sale, and what their role will be following your departure. Work with them to create an exit plan that addresses cultural issues and every other component of the merger. That will help the process move forward as smoothly as possible.
It’s a good time to be a seller, but it’s an even better time to plan for the most profitable and well-organized sell you can manage. A little effort now will pay off in the long-term.
