1. FOCUS ON EARNINGS vs. SALES. All things being
equal, a Company with $4 million in sales and $500,000 in earnings will sell for the same as a Company with $5 million in
sales and $500,000 in earnings.
2. CREATE COMPETITIVE ADVANTAGES such as obtaining recurring revenue, exclusive sales agreements,
proprietary products or rights or other defensible advantages.
3. KEEP EQUIPMENT/ASSET TRANSACTIONS
ON THE BALANCE SHEET and off the Income
Statement whenever possible.
4. CLEARLY DOCUMENT ADD-BACKS so that significant personal expenses that are paid by the Company
can be included in earnings with certainty.
5. GET CLEAR ON TAX LIABILITY
AND STRATEGIES you will employ (stock
vs. assets sale, Purchase price allocation, personal goodwill, etc.) prior to beginning the sale process.
6. SELL AT THE RIGHT TIME, with three years of increasing sales and earnings. Keep the sale process moving, time is the enemy of every deal.
7. FIND THE RIGHT BUYER. Know what types
of buyers (Individual, Strategic, Financial, etc.) will obtain the greatest benefit from the acquisition of your Company and
seek out multiple Buyers in that group.
8. GET GOOD AT NEGOTIATING. Know each Buyer
and what motivates them, always remain calm except for the very rare moment(s) when its time not to be clam, know the entire
process and what to expect, know how and when to create bargaining “chips”, know how and when to address the negatives
in the Company, expect setbacks, Keep the process moving, resist the temptation to talk first, never assume – document,
etc.
9. WORK WITH AN INTERMEDIARY so that you’ve got someone familiar with the process (deal
structure, taxes, terms, negotiating, etc.) working on the deal while you are focusing on running the business.
10. IMPROVE THE OVERALL STRENGTH OF THE COMPANY.
|
A consistent historical
record of growth and profitability |
|
10+ years in business
|
|
Substantial hard asset
value |
|
Accurate and timely Financials,
Tax Returns, and records |
|
Easy to understand motivation
for selling (e.g. retirement) |
|
Strong stable management
team, owner not critical to operations |
|
Lack of family or partners
in the business |
|
Few employees, low employee
turnover |
|
Clear opportunity for
growth and/or improvement |
|
A broad diverse customer
base |
|
Longevity of customers |
|
Strong competitive advantages |
|
Barriers to entry for
competitors |
|
Proprietary or exclusive
products |
|
Recurring revenue accounts |
|
Current and well maintained
assets and facility |
|
Strong facility location |
|
Favorable facilities lease |
|
Property included in the
sale |
|
A high demand (manf, distro,
service) vs. low (retail, bar, rest.) |
|
Favorable seller financing
|
If
you have questions or would like to learn more about strategies for improving the sale price of your business please call
us at 303 903-2100.
