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If you want to sell your business for the highest price and best terms possible then it's critical that you understand and avoid the most common mistake sellers make.
The #1 mistake sellers make is...
not preparing their businesses for sale in advance. Proper preparation is critical if a business owner desires to exit their company for the highest price and best terms possible. Most sellers however, only begin preparing once their company has been listed for sale. A small percentage of sellers do prepare ahead of time and the strategic improvements they implement before taking their businesses to market really pay off in the end.
Here's an example of a company that prepared in advance and the results they achieved.
A successful business owner scheduled a call with one of our brokers a few years before a planned exit. The purpose of the call was to get advice on how to best prepare the business for sale. The business owner took away several key strategies from our consultation, that when implemented significantly improved the desirability and value of the business.
No one wants to buy a business that requires a 70 hour per week owner operator.
One key takeaway from this call was that the business owner needed to find a way to significantly reduce his hours. Working 60 to 70 hour weeks was the norm. Although working this many hours is not unheard of when owning and operating a small business, it's not ideal when trying to sell the business. Many buyers will pass on this company simply because they have better opportunities. Imagine the same business is for sale, but instead of the current owner working 60 hours per week, the owner now only works 20. Which business would you rather own?
The importance of financial statements .
Company financials should be clean and accurate. Like many business owners (not all), our client routinely paid for personal expenses with business funds. This was unfortunate because valuation methods and industry multiples tend to be based on the reported profit taken from tax returns. This is especially true when dealing with financing. This client had approximately $60k in personal expenses per year paid for with business funds. None of these personal expenses would qualify as valid add backs that could potentially have increased the vale of the company. Fortunately this was a conversation that took place a few years before we ended up taking this business to market, so we were able to advise our client in advance on how to improve his company's financial statements.
By cleaning up the company financials and reducing the amount of time and effort required to own and operate his business before putting it on the market, this savvy business owner was able to exit at the highest price and best terms possible.
To learn more about how to best prepare your business for sale for the highest price and best terms possible, schedule a free/ no-obligation business valuation with one of our experienced brokers.
Schedule a no-cost, no-obligation business valuation call with one of our
Certified Digital Brokers.