- Take your foot off the revenue gas pedal.
Many business owners start retirement before retiring. Keep growing revenue, profits, and cash flow. Buyers are buying your customers and the revenue they bring. Shrinking sales means a shrinking price.
Many business owners try to sell the unrealized potential in their businesses. Buyers buy what is – not what might be with a lot of effort from them. They don’t care about what you might have done to grow the business. You didn’t, and they won’t pay you for what you didn’t do.
- Bury personal expenses in the business.
Buyers buy cash flow. If you have reduce cash flow and taxes by paying the rent on your girlfriend’s apartment, expect a lower price. You may try to add personal expenses back to cash flow, but you’ll never succeed in getting a buyer to pay what he / she might have paid without making a mess of your books.
Prepare for a sale three years in advance by removing all of your personal expenses from the business. A well run business with transparent books brings a higher price.
- Bring emotional baggage to the sales process.
Be ready to sell your business and walk away when you list it. The first offer you get may be the best one. The buyer may walk away if you aren’t really sure you want to sell.
One business owner walked away from two great deals, because he hadn’t resolved his emotions from working a lifetime in the business and saying goodbye to 40 years of his life. Combine this with #1 above, and you have the recipe for a lousy deal when the emotions do get resolved and the realities of needing income in retirement surface. Needing to sell is the wrong time to sell.
If you need advice about selling or preparing to sell your business, please contact us at (703) 818-8284 or e-mail fstitely@skcpas.com.
Thanks for reading!
Frank Stitely, CPA, CVA