Recently a business owner, early in his start up, asked about selling. I LOVE that he asked now and not five years from now. This is what I said to him.
Selling Your New Business
Tips to prepare
To increase the chances of selling a business, one wants as many interested and qualified buyers. Maximize Buyers With:
1) One year of growing or, at least, stable cash to owner
2) Cash flow that can be traced, preferably through tax returns
3) A personal role that is not 100 hours a week, perhaps 60
4) A trained staff, in as many responsibilities as possible.
5) Systems that work
6) Tidy books
7) A lease that is renewable and assignable plus great relationship with landlord
8) Being willing to finance 2/3 of sale and train new owner
9) Have a price that makes sense with cash flow, organization, comparables
Know that
1) Businesses rarely sell for more than 3 times cash flow
2) Once it was four months average, time to sell of those that sold. Now it is longer.
3) Buyers are nervous.
4) The longer the business is operating positively, likely it will capture a higher price.
5) It is best to plan to sell well in advance, including understanding what the realities of a sale are compared to your needs. Consult with a financial advisor.
If you would like to talk about the future sale of your business, do contact me.
