As a business owner, you’re proud of what you have built. It’s natural to feel connected to the success and value of your business. After all, it’s your ideas, discipline, and effort that made it all possible!
There are plenty of reasons why business owners put their life’s work up for sale. Some entrepreneurs look to sell as soon as they can, seeking funds for new business ventures and opportunities. Alternatively, business owners close to retirement may wish to sell their business so they can cash out and enjoy their free time.
Whatever your reasons are for selling your business, you want to obtain the highest price possible. And when you take steps to maximize the potential sale price, you gain valuable insight that can help you improve your operations right now.
Financial awareness impacts all aspects of your business. Dealing with your debt and preparing your financial records for prospective buyers are unavoidable steps in the process that you don’t want to put off until later.
Give yourself as much lead time as possible to prepare for a sale. Timelines are different for every case, but I recommend starting this process 3-5 years before you intend to sell. That way you give yourself enough time to get your records in order and enact a plan to pay off your debt.
To get the sale price you want for your business, you’ll need to be able to clearly demonstrate profitability and growth potential. For my clients, that means instituting complete reporting practices for all transactions, making sure to categorize everything so you can show profit margins for every job, service, product, or client.
I also help my clients develop robust budgeting practices so they can produce business projections backed up by hard data. Investors and buyers are looking for provable metrics to help them justify their purchase. To give them what they’re looking for, you’ll need to understand the metrics they care about most.
In a basic sense, buyers want to know how much money they can make with the business, and what opportunities they’ll have to expand on that profitability. Show them what they want to see by preparing financial records that highlight the strengths of your business, and provide a budget roadmap for continued success.
Simplify your profit and loss statement by consolidating your accounts. I recommend streamlining your cost of goods sold and overhead accounts. It is easier to understand costs when there are fewer accounts and categories to consider.
Understand the true profitability of all your business operations. Include a metric known as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to your profit and loss statements. EBITDA is a way of showing operational cash flow for a business by excluding non-operating items. It allows prospective buyers to evaluate and compare companies.
One of the main reasons I suggest you start this process early is your business-related debt. With enough time and informed budgeting, you can have that debt off your books when it comes time to sell. This is an especially-valuable step for clients near the end of their career. Not only will eliminating your debt make the business more attractive to buyers, but you’ll have a head start on enjoying your well-deserved retirement.
I’ve worked with several clients to help them prepare their financial records and improve their accounting practices for a potential sale. Throughout the process, they always learn something they wish they knew earlier. Whether the sale of your business is a far-off goal, an immediate concern, or something in between, the best time to prepare is right now.
My clients institute financial reporting practices that simplify their administrative workload, and provide data that buyers and investors are after. The business owners I’ve worked with understand what it takes to operate their business successfully, but don’t always know how to use their financial records to make profit-enhancing decisions.
Why? Because it’s complicated! Small business owners have more than enough to occupy their time without dissecting their financial records and optimizing their budgets. Advantage Insights can help with this.
Professional financial services can help you put plans in place that improve the potential sale price of your business. Partner with a financial expert to give you a better outcome when it comes time to sell. Gain the peace of mind that comes from knowing you got the best possible price for something you built.
Set aside any personal fears you have when it comes to assessing your business thoroughly. You’ve worked hard to create something special, and you deserve a price worthy of the value you’ve created. With Advantage Insights Financial Services, you have access to the expertise and understanding you need to get this done right.
Advantage Insights offers Financial Management services for all kinds of small businesses. Whether or not you’re thinking about selling, financial management will help you gain a more comprehensive understanding of your business. I give my clients the tools and training they need to start putting their financial information to work for them.
If you want to understand how Advantage Insights can help you save money and time, while maximizing profits, reach out for a free consultation!
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